CONNECTED AND MAJOR TRANSACTION - HKEXnews

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional advisers.

If you have sold all your H Shares in Jiangsu Expressway Company Limited, you should at once hand this circular and the accompanying form of proxy and confirmation slip to the purchaser or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

JIANGSU EXPRESSWAY COMPANY LIMITED 江蘇寧滬高速公路股份有限公司

(Incorporated in the People’s Republic of China as a joint-stock limited company) (Stock Code: 00177)

CONNECTED AND MAJOR TRANSACTION

Independent Financial Adviser to the Independent Board Committee

and the Independent Shareholders

Guotai Junan Capital Limited

A letter from the Board is set out on pages 1 to 47 of this circular and a letter from the Independent Board Committee is set out on pages 48 to 49 of this circular. A letter from Guotai Junan, the independent financial adviser to the Independent Board Committee and the Independent Shareholders, containing its advice to the Independent Board Committee and the Independent Shareholders in relation to the terms of the Transactions is set out on pages 50 to 92 of this circular.

A notice convening the 2015 First Extraordinary General Meeting to be held at the Conference Room, 6 Xianlin Avenue, Nanjing, the PRC on Thursday, 12 March 2015 at 2:30 p.m. is set out on page 529 to page 533 of this circular. Whether or not you are able to attend the meeting, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the Company as soon as possible and, in any event, not less than 24 hours before the time appointed for the holding of the meeting. Completion and return of the form of proxy will not preclude you from attending and voting at the meeting should you so wish, in which case you will be deemed to have withdrawn the proxy you have appointed.

23 January 2015

— i —

CONTENT

Page

DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii

LETTER FROM THE BOARD

I. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1II. Summary of the connected and major transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2III. Information about the Company and parties to the Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8IV. Basic Information about the target companies of the Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . 13V. The general principle and method for determining price in affiliated transaction/ connected and major transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24VI. Details of the agreements dated 30 December 2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25VII. The purpose of the connected and major transaction and the effect on the Company . . . . . . . . . . . . 33VIII. The approval procedure for the performance of the Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . 41IX. Waiver from strict compliance with the Hong Kong Listing Rules . . . . . . . . . . . . . . . . . . . . . . . . . . 43X. The compensation undertaking letter from the related party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44XI. Closure of register. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45XII. Extraordinary General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46XIII. Recommendation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

LETTER FROM THE INDEPENDENT BOARD COMMITTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

APPENDIX I — FINANCIAL INFORMATION OF THE GROUP. . . . . . . . . . . . . . . . . . . . . . 93

APPENDIX IIA — ACCOUNTANTS’ REPORT ON NINGCHANG ZHENLI . . . . . . . . . . . . . . 96

APPENDIX IIB — ACCOUNTANTS’ REPORT ON XIYI COMPANY . . . . . . . . . . . . . . . . . . . . 243

APPENDIX IIIA — MANAGEMENT DISCUSSION AND ANALYSIS OF NINGCHANG ZHENLI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365

APPENDIX IIIB — MANAGEMENT DISCUSSION AND ANALYSIS OF XIYI COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 384

APPENDIX IVA — VALUATION REPORT OF NINGCHANG ZHENLI . . . . . . . . . . . . . . . . . . 403

APPENDIX IVB — VALUATION REPORT OF XIYI COMPANY . . . . . . . . . . . . . . . . . . . . . . . . 427

APPENDIX VA — TRAFFIC CONSULTANT’S REPORT IN RESPECT OF NINGCHANG ZHENLI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 451

APPENDIX VB — TRAFFIC CONSULTANT’S REPORT IN RESPECT OF XIYI COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 472

APPENDIX VIA — UNAUDITED PRO FORMA FINANCIAL INFORMATION IN CONNECTION WITH THE NINGCHANG ZHENLI TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . 491

APPENDIX VIB — UNAUDITED PRO FORMA FINANCIAL INFORMATION IN CONNECTION WITH THE XIYI COMPANY TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 501

APPENDIX VIC — UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 511

APPENDIX VII — GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 521

NOTICE OF THE EXTRAORDINARY GENERAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 529

— ii —

DEFINITIONS

In this circular, the following expressions have the meanings set out below unless the context requires

otherwise:

“Absorption and Merger

Agreement”

: has the same meaning as ascribed to it under the section headed “VI.

Details of the agreements dated 30 December 2014”

“Affiliated Transactions

Guidelines”

: The Guidelines for the Affiliated Transactions of Listed Companies of the

Shanghai Stock Exchange (《上海證券交易所上市公司關聯交易實施指引》)

“American Appraisal” : American Appraisal China Limited

“Announcement” : the announcement of the Company dated 31 December 2014 in respect of

the Transactions

“associates” : has the same meaning as defined in the Hong Kong Listing Rules

“Board” : the board of Directors

“Changzhou

Expressway”

: 常州高速公路投資發展有限公司 (Changzhou Expressway Investment

Development Company Limited*), a limited liability company established

in the PRC and an existing shareholder of Xiyi Company

“Communications

Holdings”

: 江蘇交通控股有限公司 (Jiangsu Communications Holdings Company

Limited*), a limited liability company established in the PRC and an

existing shareholder of Ningchang Zhenli and Xiyi Company

“Company” : 江蘇寧滬高速公路股份有限公司 (Jiangsu Expressway Company

Limited), a joint stock limited company established in the PRC with

limited liability and whose shares are listed on the Hong Kong Stock

Exchange (Stock Code of H Shares: 00177) and the Shanghai Stock

Exchange (Stock Code: 600377) and traded in the form of American

Depository Receipts on the OTC Markets Group Inc. in the United States

(Ticker: JEXYY)

“connected person” : has the same meaning as defined in the Hong Kong Listing Rules

“Debt Transfer

Agreement”



— iii —

DEFINITIONS

“Directors” : the directors of the Company

“Enlarged Group” : the Group as enlarged after the completion of the Transactions

“Enlarged Group

(inclusive of

Ningchang Zhenli)”

: the Group as enlarged after the completion of the transaction as referred

to under the section headed “II. Summary of the connected and major

transaction — (1) Main contents of the Transactions” of this circular

in respect of the Company’s acquisition of the entire equity interest in

Ningchang Zhenli from Communications Holdings and the transfer of all

the debts of Ningchang Zhenli to the Company and the capitalization of

such debts into equity in accordance with the applicable laws

“Enlarged Group

(inclusive of Xiyi

Company)”

: the Group as enlarged after the completion of the transaction as referred

to under the section headed “II. Summary of the connected and major

transaction — (1) Main contents of the Transactions” of this circular

in respect of Guangjing Xicheng’s acquisition and merger of Xiyi

Company from Communications Holdings, Changzhou Expressway, Wuxi

Expressway and Xiyi Company

“Extraordinary General

Meeting”

: the extraordinary general meeting of the Company to be held on 12

March 2015 to consider and, if thought fit, to approve, inter alia, the

Transactions

“Group” : the Company and its subsidiaries

“Guangjing Xicheng” : 江蘇廣靖錫澄高速公路有限責任公司 (Jiangsu Guangjing Xicheng

Expressway Company Limited*), a limited liability company established

in the PRC and a 85%-owned subsidiary of the Company

“Guotai Junan”,

“Independent

Financial Adviser”

: Guotai Junan Capital Limited, a licensed corporation authorised to

conduct Type 6 (advising on corporate finance) regulated activities

under SFO, the independent financial adviser to the Independent Board

Committee and the Independent Shareholders in relation to the terms of

the Transactions and the transactions contemplated thereunder

“H Shares” : overseas-listed foreign shares of RMB1.00 each, which are issued by the

Company in Hong Kong, subscribed in Hong Kong dollars and listed on

the Hong Kong Stock Exchange

— iv —

DEFINITIONS

“HKD” : Hong Kong Dollars, the lawful currency of Hong Kong

“Hong Kong” : the Hong Kong Special Administrative Region of the PRC

“Hong Kong Listing

Rules”

: The Rules Governing the Listing of Securities on The Stock Exchange of

Hong Kong Limited

“Hong Kong Stock

Exchange”

: The Stock Exchange of Hong Kong Limited

“Independent Board

Committee”

: the independent committee of the board of Directors comprising Mr.

Zhang Erzhen, Mr. Xu Chang Xin, Mr. Gao Bo and Mr. Chen Donghua,

being all the independent non-executive Directors, formed to advise the

Independent Shareholders in respect of the terms of the Transactions

“Independent

Shareholder(s)”

: Shareholders, but excluding Communications Holdings and its associates

“Jiangsu Weixin” : 江蘇緯信工程諮詢有限公司 (Jiangsu Weixin Engineering Consultants

Ltd.*), the traffic consultant

“Latest Practicable

Date”

: 16 January 2015, being the latest practicable date prior to the printing of

this circular for ascertaining certain information contained in this circular,

unless otherwise stated

“Ningchang Zhenli” : 江蘇寧常鎮溧高速公路有限公司 (Jiangsu Ningchang Zhenli

Expressway Company Limited*), a limited liability company established

in the PRC

“Ningchang Zhenli

Equity Transfer

Agreement”



“Ningchang Zhenli

Transaction”

: the transaction as referred to under the section headed “II. Summary

of the connected and major transaction — (1) Main contents of the

Transactions” of this circular in respect of the Company’s acquisition

of the entire equity interest in Ningchang Zhenli from Communications

Holdings and the transfer of all the debts of Ningchang Zhenli to the

Company and the capitalization of such debts into equity in accordance

with the applicable laws

— v —

DEFINITIONS

“Orient Appraisal” : Orient Appraisal Co., Ltd

“PRC” : the People’s Republic of China, which for the purpose of this circular

excludes Hong Kong, the Macao Special Administrative Region of the

PRC and Taiwan

“Profit Compensation

Agreement”



“RMB” : Renminbi, the lawful currency of the PRC

“SFO” : the Securities and Futures Ordinance, Chapter 571 of the Laws of Hong

Kong

“Shanghai Listing

Rules”

: The Rules Governing the Listing of Stocks on Shanghai Stock Exchange

“Shanghai Stock

Exchange”

: The Shanghai Stock Exchange

“Shareholders” : holders of shares of the Company

“Transactions” : the transactions as referred to under the section headed “II. Summary


Transactions” of this circular in respect of (1) the Company’s acquisition

of the entire equity interest in Ningchang Zhenli from Communications

Holdings and the transfer of all the debts of Ningchang Zhenli to the

Company; and (2) Guangjing Xicheng’s acquisition and merger of Xiyi

Company from Communications Holdings, Changzhou Expressway, Wuxi

Expressway and Xiyi Company

“Wuxi Expressway” : 無錫高速公路投資有限公司 (Wuxi Expressway Investment Company

Limited*), a limited liability company established in the PRC and an

existing shareholder of Xiyi Company

“Xiyi Company” : 江蘇錫宜高速公路有限公司 (Jiangsu Xiyi Expressway Company

Limited*), a limited liability company established in the PRC

— vi —

DEFINITIONS

“Xiyi Company

Equity Transfer

Agreement(s)”



“Xiyi Company

Transaction”

: the transaction as referred to under the section headed “II. Summary


Transactions” of this circular in respect of Guangjing Xicheng’s

acquisition and merger of Xiyi Company from Communications Holdings,

Changzhou Expressway, Wuxi Expressway and Xiyi Company

“%” : percentage

* for identification purpose only

— 1 —




Directors: Registered Office:Qian Yong Xiang 6 Xianlin AvenueZhang Yang Qixia DistrictChen Xiang Hui NanjingDu Wen Yi JiangsuCheng Chang Yung Tsung, Alice PRCFang Hung, KennethZhang Erzhen*Xu Chang Xin*Gao Bo*Chen Donghua*

* Independent non-executive Directors

23 January 2015

To the Shareholders of the Company

Dear Sir or Madam,


I. INTRODUCTION

Reference is made to the Announcement dated 31 December 2014, pursuant to which the Board

of the Company announced that on 30 December 2014:

i. the Company and Communications Holdings entered into the Ningchang Zhenli Equity

Transfer Agreement pursuant to which the Company has agreed to acquire the entire

equity interest of Ningchang Zhenli held by Communications Holdings for a consideration

of RMB502,000,000 (equivalent to approximately HKD636,560,000). At the same time,

the Company and Ningchang Zhenli also entered into the Debt Transfer Agreement,

pursuant to which all of Ningchang Zhenli’s interest-bearing borrowings as at the

completion date shall be assigned to the Company (not exceeding RMB7,500,000,000

(equivalent to approximately HKD9,500,000,000)); and

— 2 —


ii. Guangjing Xicheng, a 85%-owned subsidiary of the Company, entered into a Xiyi

Company Equity Transfer Agreement with each of Communications Holdings, Changzhou

Expressway and Wuxi Expressway, respectively, pursuant to which Guangjing Xicheng

has agreed to acquire, in aggregate, the entire equity interest of Xiyi Company

for an aggregate consideration of RMB662,000,000 (equivalent to approximately

HKD839,450,000), and, at the same time, Guangjing Xicheng also entered into the

Absorption and Merger Agreement with Xiyi Company to merge with Xiyi Company and

to take over all its assets, liabilities, business and personnel.

The purpose of this circular is to provide, among other thing, the details of the Transactions and

other information in accordance with the Hong Kong Listing Rules. This circular also contains

the notice convening the Extraordinary General Meeting.

II. SUMMARY OF THE CONNECTED AND MAJOR TRANSACTION

(1) Main contents of the Transactions

The Transactions of the Company consist of the following two components:

1. Acquisition of all equity interest and interest-bearing borrowings of Ningchang

Zhenli

On 30 December 2014, the Company and Communications Holdings entered into

the Ningchang Zhenli Equity Transfer Agreement. The Company has agreed to

acquire 100% of the equity interest in Ningchang Zhenli held by Communications

Holdings for a consideration of RMB502,000,000 (equivalent to approximately

HKD636,560,000). At the same time, the Company and Ningchang Zhenli entered

into the Debt Transfer Agreement, pursuant to which all of Ningchang Zhenli’s

interest-bearing borrowings as at the completion date shall be assigned to the

Company (not exceeding RMB7,500,000,000). Following the assignment of such

interest-bearing borrowings of Ningchang Zhenli to the Company, the Company

shall capitalise such debts into equity in accordance with the applicable laws.

— 3 —


Pursuant to the applicable PRC law, the consideration payable for the disposal

of state-owned assets has to be made with reference to valuation of the assets

to be transferred as prepared by qualified valuer and hence the consideration

in respect of the entire equity interest in Ningchang Zhenli, which amounted to

RMB502,000,000 (equivalent to approximately HKD636,560,000), was determined

based on the assessment of value of the entire equity interest of Ningchang Zhenli

by the state-owned asset valuation method. Given the transaction contemplated

is a connected and major transaction under the Hong Kong Listing Rules, the

Company has commissioned an independent valuer to report on the valuation

of Ningchang Zhenli. In deciding the consideration payable by the Company,

the directors primarily took into account the preliminary valuation prepared by

American Appraisal and the other factors as disclosed in more detail in the section

VII below. The consideration in respect of the interest-bearing borrowings will

be based on the outstanding amount as at the completion date. The total amount

of the interest-bearing borrowings owed by Ningchang Zhenli as at 30 September

2014 amounted to RMB7,295,500,000. The relevant consideration (not exceeding

RMB7,500,000,000 (equivalent to approximately HKD9,500,000,000)) will be paid

out of the Company’s own fund or through the Company’s financing activities.

2. Acquisition and absorption and merger of Xiyi Company by Guangjing

Xicheng

On 30 December 2014, Guangjing Xicheng, a subsidiary of the Company, entered

into a Xiyi Company Equity Transfer Agreement with each of Communications

Holdings, Changzhou Expressway and Wuxi Expressway, respectively, pursuant to

which Guangjing Xicheng has agreed to acquire, in aggregate, 100% of the equity

interest of Xiyi Company. At the same time, the Company and Xiyi Company

entered into the Absorption and Merger Agreement. Guangjing Xicheng shall

merge with Xiyi Company when the former acquired the entire equity interest of

Xiyi Company. The consideration payable by Guangjing Xicheng pursuant to this

transaction is RMB662,000,000 (equivalent to approximately HKD839,450,000).

— 4 —


Pursuant to the applicable PRC law, the consideration payable for the disposal

of state-owned assets has to be made with reference to valuation of the assets

to be transferred as prepared by qualified valuer and hence the consideration

in respect of the entire equity interest in Xiyi Company, which amounted to

RMB662,000,000 (equivalent to approximately HKD839,450,000), was determined

based on the assessment of value of the entire equity interest of Xiyi Company

the state-owned asset valuation method. Given the transaction contemplated

is a connected and major transaction under the Hong Kong Listing Rules, the

Company has commissioned an independent valuer to report on the valuation of

Xiyi Company. In deciding the consideration payable by Guangjing Xicheng,

the directors primarily took into account the preliminary valuation prepared by

American Appraisal and the other factors as more detailed disclosed in the section

VII below. In accordance to the respective equity interest held by Communications

Holdings, Changzhou Expressway and Wuxi Expressway in Xiyi Company, the

consideration to be paid by the Company to Communications Holdings, Changzhou

Expressway and Wuxi Expressway in relation to the acquisition of Xiyi Company

will be RMB519,010,000 (equivalent to approximately HKD658,130,000),

RMB31,910,000, (equivalent to approximately HKD40,460,000) and

RMB111,080,000 (equivalent to approximately HKD140,860,000), respectively.

Such consideration will be paid out of Guangjing Xicheng’s own fund or through

Guangjing Xicheng’s financing activities.

These two transactions are independent to each other, and shall be approved in

shareholders’ meeting separately.

(2) The Transactions constitute a significant affiliated transaction/connected and major

transaction

Significant affiliated transaction

Pursuant to the Shanghai Listing Rules and the Affiliated Transactions Guidelines,

as Communications Holdings which is a party to the Transactions, is the controlling

shareholder of the Company and is also the controlling shareholder of both Ningchang

Zhenli and Xiyi Company, the target companies of the Transactions, Communications

Holdings is an affiliated party and the Transactions constitute an affiliated transaction.

At the same time, as the transaction amount exceeds RMB30,000,000 and also exceeds

5% of the absolute value of the latest audited net asset of the Company, the Transactions

constitute a significant affiliated transaction. The Transactions do not constitute a

significant asset restructuring under the related regulations in Administrative Measures on

Significant Asset Restructuring of Listed Companies (《上市公司重大資產重組管理辦法》).

— 5 —


According to the Affiliated Transactions Guidelines and other relevant regulations issued

by the Shanghai Stock Exchange, given that the consideration for the entire equity

interests of Ningchang Zhenli is based on income approach, and exceeds its net book

value by over 100%, Communications Holdings has made profit guarantee in respect of

Ningchang Zhenli’s profit before tax and financial expenses after deducing non-recurring

gains and losses from 2015 to 2017.

Connected and major transaction

As at the Latest Practicable Date, Communications Holdings directly holds 2,742,578,825

shares of the Company, representing approximately 54.44% of the issued share capital

of the Company, and both Ningchang Zhenli and Xiyi Company are subsidiaries of

Communications Holdings. Therefore, Communications Holdings, Ningchang Zhenli

and Xiyi Company are connected persons of the Company and the Transactions together

constitute a connected transaction under Chapter 14A of the Hong Kong Listing Rules.

Given that the Transactions involve Communications Holdings or its associates as one

of the counterparties to the relevant agreements, the Directors of the Company are of

the view that the these Transactions should be aggregated pursuant to Rule 14.22 and

Rule 14A.81 of the Hong Kong Listing Rules. Upon aggregating the Transactions, given

that the asset ratio for these Transactions is approximately 37.28%, although all other

applicable ratios do not exceed 25%, the Transactions constitute a major transaction

pursuant to Chapter 14 of the Hong Kong Listing Rule. It is therefore subject to reporting,

announcement, circular and independent shareholders’ approval requirements under

Chapters 14 and 14A of the Listing Rules.

Continuing connected transaction

The interest-bearing borrowings owed by Ningchang Zhenli, which would be acquired

by the Company, include loans owed to Communications Holdings and its subsidiaries

(Jiangsu Communications Holding Group Financial Company Limited (hereinafter

“Communications Financial”) and Jiangsu Yanjiang Expressway Co., Ltd. (“Yanjiang

Expressway”), Jiangsu Runyang Bridge Development Company Limited (“Runyang

Bridge”), Jiangsu Expressway Network Operation & Management Co., Ltd. (“Network

Operation Company”), Jiangsu Jinghu Expressway Company Limited (“Jinghu

Expressway”), Nantong Tongsha Port Company Limited (“Tongsha Port”) and Taicang

Container Lines Company Limited (“Taicang Lines”)). Communications Holdings,

Communications Financial, Yanjiang Expressway, Runyang Bridge, Network Operation

Company, Jinghu Expressway, Tongsha Port and Taicang Line are connected persons of

the Company and the undertaking constitutes continuing connected transactions pursuant

to Chapter 14A of the Hong Kong Listing Rules. However, given that the loans with

— 6 —


Communications Financial are conducted on normal commercial terms or better terms

and are not secured by the assets of the Group, such connected transactions are exempted

from the reporting, announcement, circular and independent shareholders’ approval

requirements under Rule 14A.90 of the Hong Kong Listing Rules.

Ningchang Zhenli and Xiyi Company are shareholders of Network Operation Company.

Network Operation Company is the only company in the Jiangsu Province which provides

technical services for expressway inter-networked toll collection, and its equity interests

were held by various major expressway and bridge operators in the Jiangsu Province. Its

services include toll auditing and account settlements (including inter-provincial network

settlements in ETC East China region); electronic toll collection services; collection,

dispatch, coordination and management of expressways’ inter-network public information

in Jiangsu Province; procurement and distribution of On Board Unit (OBU) and Identity

Card which are used by expressway toll systems in Jiangsu Province; publicity and

promotion of the ETC system and the sale of OBU, as well as ancillary services such as

the setting up and marketing of the ETC customer service networks. The standard fee

rate chargeable by Network Operation Company for the provisions of operation-network

services to the member of the expressway networks shall be paid by Ningchang Zhenli

and Xiyi Company in cash based on the actual toll revenue and the service fee standards

under the Official Response of the Provincial Price Bureau on the Inter-network Service

Fee Standards of Expressways (Jiangsu Province Price Bureau Su Jia Fu [2008] No. 204)

(江蘇省物價局蘇價服[2008]204號《省物價局關於高速公路聯網服務費標準的批覆》), which is not more than 0.2% for cash revenue and not more than 2% for non-cash

revenue. The annual technical service fees paid by Ningchang Zhenli and Xiyi Company

for 2014 were estimated to be approximately RMB3,000,000 and RMB1,900,000,

respectively (as set out in the traffic consultant reports of Ningchang Zhenli and Xiyi

Company in Appendix VA and Appendix VB, respectively). Based on the fees paid for

2014 and the estimated toll revenues, the maximum annual technical service fees payable

by Ningchang Zhenli and Xiyi Company are calculated based on the assumption that all

toll revenues will be non-cash revenue, i.e. multiplying the maximum rate of 2% by the

estimated annual toll revenues of each of Ningchang Zhenli and Xiyi Company. Hence,

the maximum annual technical service fees payable by Ningchang Zhenli for 2015, 2016

and 2017 are expected to be approximately not more than RMB15,080,000 (equivalent

to approximately HKD19,120,000), RMB16,440,000 (equivalent to approximately

HKD20,850,000) and RMB17,160,000 (equivalent to approximately HKD21,760,000)

respectively, whereas the maximum annual technical service fees payable by Xiyi

Company for 2015, 2016 and 2017 are expected to be approximately not more than

RMB5,930,000 (equivalent to approximately HKD7,520,000), RMB6,430,000 (equivalent

to approximately HKD8,150,000) and RMB6,950,000 (equivalent to approximately

— 7 —


HKD8,810,000) respectively, representing less than 5% of the unaudited consolidated total

assets of the Company as at 30 September 2014, the audited consolidated total revenue

of the Company for the year 2013 and the current market capitalization of the Company,

the technical services arrangements constitute continuing connected transactions under

the Hong Kong Listing Rules, which are subject to the reporting and announcement

requirements but are exempt from the independent shareholders’ approval requirement.

The technical services transaction must comply with the requirements of annual review

under the Hong Kong Listing Rules. Network Operation Company is an affiliated person

of the Company and the provisions of technical services constitute affiliated transactions

under the Shanghai Listing Rules. As these transactions represent less than 5% of the net

assets of the Company, under the Shanghai Listing Rules, they are subject to the reporting

and announcement requirements but are exempt from independent shareholders’ approval

requirement.

As at the Latest Practicable Date, both Ningchang Zhenli and Xiyi Company have

(i) maintained various outstanding account receivables balances with associate(s) of

Communications Holdings; and (ii) entered into certain related party transactions in

relation to, among other, sale and purchase of goods, provision and receipt of services,

borrowings and leasing. Following completion of the Transactions, the above mentioned

related party transactions and the related account receivables are expected to continue, and

some of which (being transactions between the Group and Commutation Holdings (and/

or its associates)) would constitute continuing connected transactions under Chapter 14A

of the Hong Kong Listing Rules. In order to comply with the relevant requirements under

the Hong Kong Listing Rules, the Company, Ningchang Zhenli and Guangjing Xicheng

shall, upon completion of the Transactions, enter into a fresh set of written agreements

with Communications Holdings (and/or its associates) in respect of such transactions.

Further announcement(s) will be issued by the Company in compliance with the

relevant requirements under Chapter 14A of the Hong Kong Listing Rules as and when

appropriate. In respect of the other short term and long term borrowings of Ningchang

Zhenli and Xiyi Company which will not constitute continuing connected transactions (and

will therefore not be subject to the written agreements as mentioned above) and will not

be transferred pursuant to the Debt Transfer Agreement, the Company will repay the same

as they fall due, or make necessary arrangements with the aim of reducing the relevant

finance costs.

— 8 —


III. INFORMATION ABOUT THE COMPANY AND PARTIES TO THE

TRANSACTIONS

(1) The Company

The Company is principally engaged in the investment, construction, operation and

management of toll road and bridge within Jiangsu Province and the development and

operation of ancillary service areas along such toll road and bridges.

(2) Communications Holdings

Name of corporation Jiangsu Communications Holdings Company Limited (江蘇交通控股有限公司)

Nature of the corporation Limited liability company (state-owned)

Registered address 291 East Zhongshan Road, Nanjing, the PRC.

Legal representative Chang Qing (常青)

Registered capital RMB16,800,000,000

Scope of business Management and administration of state-owned

assets (within the provincial government’s mandate),

investment, construction, operation and management

of transportation infrastructure, transportation and

related industries, highway toll, real estate investment,

domestic trade. (Projects subject to the approval of the

relevant departments shall be approved by the relevant

departments before being carried out)

Shareholder(s) State-owned Assets Supervision and Administration

Commission of Jiangsu Province (100%)

Principal Business Communications Holdings, a wholly state-owned

company, is authorised by the government of Jiangsu to

be principally engaged in the investment, construction,

operations and management of the transport infrastructure,

transportation and related properties, and the principal

business has remained stable for the past 3 years.

— 9 —


Relationship with the

Company

Communications Holdings directly holds 2,742,578,825

shares of the Company, representing 54.44% of the

issued share capital of the Company, and is the largest

shareholder of the Company. Communications Holdings

is a related party of the Company pursuant to the

Shanghai Listing Rules and a connected person of the

Company pursuant to the Hong Kong Listing Rules.

The companies have separate business, assets, personnel,

finance, and institution. Apart from shareholding relation

with Communications Holdings, the following debtor-

creditor relationship exists between the companies: As at

30 September 2014, Communications Holdings provided

guaranteed credit facilities to the Company with a balance

of RMB2,133,410,000; Communications Financial

(subsidiary of Communications Holdings) provided

working capital financing in the sum of RMB200,000,000

to Guangjing Xicheng and Jiangsu Far East Shipping

Limited, a subsidiary of Communications Holdings,

provided an entrusted loan of RMB190,000,000 to the

Company.

Major financial indicators

(Audited)

Unit: RMB’0000

Item 31 December 2013 31 December 2012

Total assets 21,060,893.61 20,630,515.14

Total liabilities 14,323,592.08 14,313,356.84

Equity attributable to parent company 4,234,996.07 4,054,932.42

Item 2013 2012

Operating income 4,101,848.89 3,828,132.43

Net profit attributable to

parent company 222,322.04 282,221.13

— 10 —


Shareholding Structure

Set out below is the shareholding relationship between the Company, Communications

Holdings, Ningchang Zhenli and Xiyi Company as at the Latest Practicable Date:

100%

100%

54.44%

85%

78.40%

State-owned Assets Supervision and Administration Commission of Jiangsu

Province

Communications Holdings

The CompanyNingchang

ZhenliXiyi Company

Guangjing Xicheng

16.78% 4.82%

Changzhou Expressway

WuxiExpressway

Set out below is the shareholding relationship between the Company, Communications

Holdings, Ningchang Zhenli and Xiyi Company upon completion of the Transactions:

54.44%

100%

85% 100%

State-owned Assets Supervision and Administration Commission of Jiangsu

Province


The Company

Ningchang ZhenliGuangjing Xicheng*

*Note: Xiyi Company shall be absorbed and merged into Guangjing Xicheng following

the completion of the Transactions

— 11 —


(3) Wuxi Expressway

Name of corporation Wuxi Expressway Investment Company Limited (無錫高速公路投資有限公司)

Registered capital RMB270,000,000

Registered address 100 East Yunhe Road, Wuxi, the PRC

Legal representative Xue Jun (薛軍)

Principal business Wuxi Expressway is principally engaged in the

investment, operation and management of expressway

and other regional highway projects, and the principal

business has remained stable for the past three years

Date of establishment 21 January 2001

As at the Latest Practicable Date, to the best of the Directors’ knowledge, information

and belief having made all reasonable enquiries, Wuxi Expressway and its ultimate

beneficial owners are third parties independent of and not a connected person (as defined

in the Hong Kong Listing Rules) of the Company.

(4) Changzhou Expressway

Name of corporation Changzhou Expressway Investment Development

Company Limited (常州高速公路投資發展有限公司)


Registered address Building 8, 583 Tongjiang Avenue, Changzhou, the PRC

Legal representative Ye Jun (葉軍)

Principal business Changzhou Expressway is principally engaged in the

construction, operation and management of highways,

roads, bridges and other infrastructure, and the principal

business has remained stable for the past three years

Date of establishment 11 May 2000

— 12 —


As at the Latest Practicable Date, to the best of the Directors’ knowledge, information

and belief having made all reasonable enquiries, Changzhou Expressway and its ultimate

beneficial owners are third parties independent of and not a connected person (as defined

in the Hong Kong Listing Rules) of the Company.

(5) Creditors of the interest-bearing borrowings of Ningchang Zhenli as at 30 September

2014

For the list of creditors of the interest-bearing borrowings of Ningchang Zhenli as at

30 September 2014, please refer to the section “IV. Basic information about the target

companies of the Transactions — (1) Ningchang Zhenli — v. Interest-bearing borrowings

proposed to be transferred in the transaction” in this letter.

At the Latest Practicable Date, after making all reasonable enquiries, according to the

Directors’ knowledge, information and belief, the connected relationships between the

creditors and the Company are as follows:

Debtor Connected relationship with the Company

Jiangsu Runyang

Bridge Development

Company Limited

Connected person: a subsidiary of a substantial shareholder

of the Company, Communications Holdings

Jiangsu Expressway

Network Operation

& Management

Company Limited



Jiangsu Communications

Holding Group

Financial Company

Limited



Jiangsu Jinghu

Expressway Company

Limited



Jiangsu Yanjiang

Expressway Co., Ltd



Nantong Tongsha Port

Company Limited



Taicang Container Lines

Company Limited



Communications

Holdings

Connected person: a substantial shareholder of the Company

— 13 —


Save as the aforementioned creditors, all other creditors are commercial banks with PRC

bank operating licenses. As at the Latest Practicable Date, to the best of the Directors’

knowledge, information and belief having made all reasonable enquiries, all other

creditors (China Development Bank (Jiangsu Branch), China Construction Bank (Jiangsu

Branch), Wangfu Nanjing Branch of CITIC Bank and Bank of China (Jiangsu Branch))

and their ultimate beneficial owners are third parties independent of and not a connected

person of the Company.

IV. BASIC INFORMATION ABOUT THE TARGET COMPANIES OF THE

TRANSACTIONS

The Transactions concern: the Company acquiring 100% of the equity interest of Ningchang

Zhenli and Xiyi Company from Communications Holdings and other parties by cash, and

merging with Xiyi Company; and also carrying out debt restructuring in respect of Ningchang

Zhenli at the same time (through acquiring all the interest-bearing borrowings of Ningchang

Zhenli and capitalising such debts).

The relevant category of these affiliated transactions is asset acquisition and debt restructuring.

(1) Ningchang Zhenli

i. Basic Information

Name of corporation Jiangsu Ningchang Zhenli Expressway Company Limited

(江蘇寧常鎮溧高速公路有限公司)

Nature of corporation Limited liability company

Registered capital RMB3,328,850,000

Registered address 291 East Zhongshan Road, Nanjing, the PRC

Legal representative Chen Xianghui (陳祥輝)

— 14 —


Business scope Approved business scopes: (the following areas are

operated by branch organizations as regulated by the

respective business licenses): car maintenance and repair,

catering service, sales of food and beverage, cigarettes

(cigar), sales of refined oil products, accommodation,

sales of publications.

General business scope: highway construction,

management, repair and related technical consultation, toll

for traffic access, sales of goods, textile products, daily

commodities, hardware, electrical equipment, chemicals

and water product, design of, production of, agent for

and outdoor distribution of advertisements, prints and gift

advertisements.

Date of incorporation 10 June 2004

ii. Description on ownership

As at the Latest Practicable Date, Ningchang Zhenli was 100% owned by

Communications Holdings. The total investment cost of Communications Holdings

in Ningchang Zhenli, which is Communications Holdings’ original purchase cost of

its equity interest in Ningchang Zhenli, is RMB3,328,850,000.

Note: Since the consideration for the acquisition of Ningchang Zhenli is based on a valuation, the historic acquisition costs of Communications Holdings is not relevant.

The ownership concerning the equity interest of Ningchang Zhenli is transparent

without any charge or mortgage. Ningchang Zhenli is not involved in any

significant litigation, arbitration or other circumstances which will impede the

transfer of ownership.

— 15 —


iii. Description of operations of relevant assets

Ningchang Zhenli is principally engaged in the operation, maintenance and

management of Ningchang Expressway and Zhenli Expressway, which operations

are normal. The main revenue of the business of Ningchang Zhenli is its toll

income. A brief summary of the basic information of Ningchang Expressway and

Zhenli Expressway is as follows:

Name of road Starting point Ending point Kilometers No. of lanes Concession period

Ningchang Expressway Lishui Duzhuang Hub South of Changzhou

Interchange

87.26 6 lanes in the entire expressway Sep 2007 to Sep 2032

Zhenli Expressway Dantu Hub Liyang Qianma Hub 65.658 6 lanes in the entire expressway Sep 2007 to Sep 2032

Set out below is a geographic diagram showing Jiangsu Section of the Huning

Expressway (“Shanghai-Nanjing Expressway”), the major road assets of the

Company and the major road assets of Ningchang Zhenli:

Taihu Lake

Ma’anshan

Nanjing

ZhenJiang

Hanjiang Yangzhou

Runzhou

Jintan

Lishui

Gaochun

Liyang

Yixing

Wujin

YanjiangExpressway

South Connectionof Runyang Bridge

Runyang Bridge

Lima Expressway

LiguangExpressway

Shanghai-NanjingExpressway

NingchangExpresswayZhenli

Expressway

North Connectionof Runyang Bridge

DanyangJurong

Changzhou

— 16 —


iv. Major financial data (Two years and nine months ended 30 September 2014)

In accordance of the audit report De Shi Bao (Shen) Zi No. S0211 (specific audit

report) (standard unqualified opinion) of Ningchang Zhenli (on consolidated basis)

as prepared by Deloitte Touche Tohmatsu Certified Public Accountants LLP, a

licensed corporation to carry out equity and futures activities, the major financial

data of Ningchang Zhenli for the years 2012 and 2013 and the nine months ended

30 September 2014 is as follows:

Unit: RMB’0000

(Audited)

Item

30 September

2014

31 December

2013

31 December

2012

Total assets 768,402.75 788,804.08 815,563.78

Total liabilities 747,352.44 743,691.41 725,451.57

Shareholders’ equity 21,050.31 45,112.67 90,112.21

Item Jan to Sep 2014 2013 2012

Income 49,165.21 45,613.98 42,289.80

Financial expenses 35,449.96 46,744.00 48,851.06

Profit –24,107.27 –45,130.88 –46,467.70

Net profit* –24,062.36 –44,999.54 –46,663.12

* Net profit before deduction of tax and non-recurring items = net profit after deducting taxes and non-recurring items

The concession rights of Ningchang Expressway and Zhenli Expressway

represented over 90% of the assets of Ningchang Zhenli. These concession rights

had a book value of RMB7,018 million as at 30 September 2014, and the aggregate

amortization was RMB908 million. In 2013 the annual amortization was RMB185

million. The amortization from January to September 2014 was RMB200 million.

After the completion of the Transactions, Ningchang Zhenli shall be consolidated

into the consolidated financial statements of the Company. The Company has not

provided any guarantee for Ningchang Zhenli or appointed Ningchang Zhenli to

manage assets. No fund of the Company has been used by Ningchang Zhenli.

— 17 —


v. Interest-bearing borrowings proposed to be transferred in the Transactions

The Company intends to acquire all interest-bearing borrowings of Ningchang

Zhenli as at the completion date of the transfer of equity interest. As at 30

September 2014, the details of interest-bearing borrowings of Ningchang Zhenli is

as follows:

Unit: RMB’0000

No. Loan Unit

Detailed

breakdown of

principal

Year of

Maturity

Total amount

of principal

Whether the

consent letter

from the creditor

has been obtained

Further

information

1 Jiangsu Branch of

China Development Bank

10,000 2017 127,000 Yes Pledge of concession

right of Ningchang

Expressway

102,000 2020

15,000 2022

2 Jiangsu Branch of

China Construction Bank

50,750 2019 109,750 Yes Guaranteed by

Communications Holdings59,000 2020

3 Jiangsu Branch of Bank of China 69,300 2020 69,300 Yes Pledge of

concession right

of Zhenli

Expressway

4 Wangfu Nanjing Branch of

CITIC Bank

87,000 87,000 Fully repaid

on 28 November

2014

Guaranteed by

Communications

Holdings

5 Jiangsu Runyang Bridge Development

Company Limited

30,000 2019 90,000

60,000 2023

6 Jiangsu Expressway Network Operation

& Management Company Limited

5,000 2014 25,000

20,000 2015

7 Jiagnsu Communications Holding

Group Financial Company

Limited

19,500 2014 19,500

— 18 —


No. Loan Unit

Detailed

breakdown of

principal

Year of

Maturity

Total amount

of principal

Whether the

consent letter

from the creditor

has been obtained

Further

information

8 Jiangsu Jinghu Expressway

Company Limited

2,000 2015 2,000

9 Jiangsu Yanjiang Expressway

Co., Ltd

5,000 2015 5,000

10 Nantong Tongsha Port

Company Limited

5,000 2015 5,000

11 Taicang Container Lines

Company Limited

10,000 2015 10,000

12 Communications Holdings

(debt financing facilities)

Short-term loan

financing facility

10,000

2014

180,000

Short-term loan

financing facility

20,000

2015

Fixed bond

30,000

Fixed bond

35,000

2017

Mid-term loan

financing facility

20,000

2019

Mid-term loan

financing facility

25,000

2022

Mid-term loan

financing facility

40,000

2023

Total 729,550

The Transactions will not lead to any transfer of the relevant charge, pledge or

guarantee.

— 19 —


2

11

0 0 0

5

10

23

4

10

0

5

10

15

20

25

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

100

mill

ion

RM

B

Distribution of maturation dates of all interest-bearing borrowings of Ningchang Zhenli

NB.: The above distribution of maturation date of all interest-bearing borrowings of Ningchang Zhenli does not include the repaid debts of RMB870 million owed to Wangfu Nanjing Branch of CITIC Bank.

As set out in the table above, 2015, 2019, 2020 and 2023 are the major debt

maturation years of Ningchang Zhenli, each exceeding RMB1 billion. According

to the accountants’ reports of the Company, the net operational cash flow of the

Company is above RMB3 billion for each financial year since 2010. It is expected

that Ningchang Zhenli, after the acquisition of interest-bearing borrowings,

will generate certain net operational cash flow, which will increase each year.

Expressway industry is an infrastructure industry. It can ensure a stable cash flow

except when significant economic downturn arises. Therefore, in the face of the

cash flow of the Company and the expected cash flow of Ningchang Zhenli, the

Company has capacity to repay the debts set out above on their maturation dates.

At the same time, the Company can make good use of its own sound credit

worthiness and its strong financing advantage, and swap the debts with higher

interest rates with debts with lower interest rates. It can also make prepayment

and extension of loans to adjust the maturation date and so reduce its pressure in

making concentrated repayment of debts.

— 20 —


(2) Xiyi Company

i. Basic Information

Name of corporation Jiangsu Xiyi Expressway Company Limited (江蘇錫宜高速公路有限公司)

Nature of corporation Limited liability company


Registered address 100 East Yunhe Road, Wuxi, the PRC

Legal representative Yang Fei (楊飛)

Business scope Approved business scopes: (Limited to operations by

branch organizations): transport of passengers and

goods, warehousing; sales of petroleum products; car

maintenance; accommodation, catering service; sales of

non-staple and other food; sales of tobacco; sales and

renting of publications.

General business scope: construction, maintenance and

management of Xiyi Expressway, collection of toll for

traffic access. (the following areas are limited to branch

organizations) design of, production of, agent for and

distribution of national advertisements; sales of textile

products, daily commodities (excluding explosives),

hardware, electrical equipment, chemicals (excluding

hazardous products) and car spare parts; sales of goods;

provision of enterprise management service.

**(For business scope which requires special approval,

approval should be obtained prior to operation)**

Date of incorporation 11 September 2000

— 21 —


ii. Description on ownership

The shareholder(s) of Xiyi Company are as follows:

Unit: RMB’0000

Number Name of Shareholder

Amount of

capital

contribution

Percentage

of capital

contribution

1 Jiangsu Communications Holding

Company Limited

64,617.00 78.40%

2 Wuxi Expressway Investment

Company Limited

13,825.00 16.78%

3 Changzhou Expressway Investment

Development Company Limited

3,975.00 4.82%

Total: 82,417.00 100.00%

The total investment cost of Communications Holdings in Xiyi Company, which

is Communications Holdings’ original purchase cost of its equity interest in Xiyi

Company, is RMB646,170,000.

The ownership concerning the equity interest of Xiyi Company is transparent

without any charge or mortgage. Xiyi Company is not involved in any significant

litigation, arbitration or other circumstances which will impede the transfer of

ownership. Each of the shareholders of Xiyi Company unanimously agreed to

waive its right of first refusal in respect of the other equity holders’ disposal of

their equity interest in Xiyi Company to Guangjing Xicheng.

— 22 —


iii. Description of operations of relevant assets

Xiyi Company is principally engaged in the operation, maintenance and

management of Xiyi Expressway, Luma Highway and Huantaihu Expressway. The

operation of all expressways under the management of Xiyi Company is normal.

The main revenue of the business of Wuxi Company is the toll income. A brief

summary of the basic information of the expressways of Xiyi Company is as

follows:

Name of road Starting point Ending point Kilometers No. of lanes Concession period

Xiyi Expressway Northern Wuxi Hub Yixing West Dock Hub 69.3 4 lanes in the entire

expressway

Sep 2003 to Sep 2028

Luma Highway Luqu Interchange Mashan 10 4 lanes in the entire

expressway

Jan 2005 to Sep 2028

Wuxi Huantaihu

Expressway

Wuxi Shuofang Hub Wuxi Nanquan Interchange 20 6 lanes in the entire

expressway

Oct 2006 to Oct 2031

Set out below is a geographic diagram showing Shanghai-Nanjing Expressway, the

major road assets of the Company, Guangjing Xicheng Expressway and the major

road assets of Xiyi Company:

Taihu Lake

Xinbei

Tianning

Binhu

Binhu

Nanchang

XishanChongan

Huishan

Beitang

Zhonglou

Qishuyan

Gangzha

Gangzha

Chongchuan

Zhangjiagang

Jingjiang

Changshu

Xiangcheng

Huqiu

Huqiu

Wuzhong

Xiyi Expressway

Shanghai-NanjingExpressway

Guangjing XichengExpressway

XizhangExpressway

HuantaihuExpressway

Luma Class IHighway

Xitong Bridge(under construction)

Yixing

Wujin

Changzhou

Wuxi

Nantong

Suzhou

— 23 —


iv. Major financial data (Two years and nine months ended 30 September 2014)

In accordance of the audit report De Shi Bao (Shen) Zi No. S0210 (specific audit

report) (standard unqualified opinion)(on consolidated basis) of Xiyi Company

as prepared by Deloitte Touche Tohmatsu Certified Public Accountants LLP, a

licensed corporation to carry out equity and futures activities, the major financial

data of Xiyi Company for the years 2012 and 2013 and the nine months ended 30

September 2014 is as follows:

Unit: RMB’0000

(Audited)

Item

30 September

2014

31 December

2013

31 December

2012

Total assets 246,721.00 250,763.66 261,135.21

Total liabilities 180,784.32 184,485.86 192,057.14

Shareholders’ equity 65,936.68 66,277.80 69,078.07

Items Jan to Sep 2014 2013 2012

Income 20,762.84 26,274.31 25,214.53

Financial expenses 8,324.93 11,957.57 12,495.45

Profit –283.81 –2,798.29 –2,011.86

Net profit* –341.12 –2,800.27 –2,123.15

* Net profit before deduction of tax and non-recurring items = net profit after deducting taxes and non-recurring items

The concession rights of the expressways under the management of Xiyi Company,

with a book value of RMB2,300 million represented over 90% of the assets of

Xiyi Company as at 30 September 2014. The aggregate amortization was RMB482

million. In 2013, the annual amortization was RMB52 million. The amortization

during January to September 2014 was RMB50 million.

After the completion of the Transactions, Xiyi Company shall be consolidated

into the consolidated financial statements of the Company. The Company has not

provided any guarantee for Xiyi Company, and the Company has not appointed

Xiyi Company to manage its assets. No funds of the Company has been used by

Xiyi Company.

— 24 —


V. THE GENERAL PRINCIPLE AND METHOD FOR DETERMINING PRICE IN

AFFILIATED TRANSACTION/CONNECTED AND MAJOR TRANSACTION

i. The principle of price determination of the affiliated transactions

As the Transactions involve the disposal of state-owned assets, the prices of 100% equity

interests of Ningchang Zhenli and 100% equity interests of Xiyi Company have to be

determined based on the valuation prepared by Orient Appraisal, which is qualified to

advise on securities and futures transactions and the consideration will be determined upon

assessment after registration by the state-owned assets administrative departments. Orient

Appraisal has adopted the income approach in the valuation. It is finally determined that

the prices of 100% equity interests of Ningchang Zhenli is RMB502,000,000, and the

price of 100% equity interests of Xiyi Company is RMB662,000,000. On 8 January 2015,

the relevant transfers concerning state-owned assets were approved by the State-owned

Assets Supervision and Administration Commission of Jiangsu Province.

ii. Valuation for Connected and Major Transaction

Given the Transactions constitute a connected and major transaction and involve the

acquisition interests of infrastructure companies, the Company has instructed American

Appraisal to conduct an independent business valuation. American Appraisal has formed

a valuation opinion using the income approach (also known as discounted cash flow

approach) and the fair market value of the entire equity interest in business enterprise of

Ningchang Zhenli as at the valuation date (30 September 2014) was preliminarily valued

at approximately RMB522,000,000, whereas the fair market value of the entire equity

interest in business enterprise of Xiyi Company as at the valuation date (30 September

2014) was preliminarily valued at approximately RMB669,000,000. Pursuant to the Hong

Kong Listing Rules, such valuation reports will be regarded as profit forecasts and such

reports have been incorporated in this circular as Appendix IVA and Appendix IVB,

respectively. The key assumptions of the relevant valuation are as follows:

• no major changes are expected in the political, legal and economic conditions in

the PRC;

• industry trend and market conditions for toll road industry in the PRC will continue

to develop according to prevailing market expectations;

• there will be no major changes in the current taxation law and/or taxation rates

applicable to the relevant companies;

— 25 —


• the operation of the relevant companies will not be constrained by the availability

of finance;

• future exchange rates and interest rates movement will not differ materially from

prevailing market expectations; and

• the relevant companies will retain competent management, key personnel and

technical staff to support its ongoing operations.

Having considered that the underlying assumptions adopted in the valuation reports issued

by American Appraise are in line with the actual circumstances and are normally used in

valuing toll road projects, the Board considers that the use of such assumptions are fair

and reasonable. The Board further confirms that the relevant profit forecasts contained in

the valuation reports incorporated as Appendices IVA and IVB of this circular were made

after due and careful enquiry by the Board.

VI. DETAILS OF THE AGREEMENTS DATED 30 DECEMBER 2014

(1) Principal terms of the equity transfer agreement (the “Ningchang Zhenli Equity

Transfer Agreement”) between the Company and Communications Holdings and the

relevant arrangements on performance of the agreement:

Signatories Party A: the Company

Party B: Communications Holdings

Consideration and method

of payment

The Company shall pay a sum of RMB502,000,000 to

Communications Holdings as the consideration for the

acquisition of the entire shareholding of Ningchang Zhenli

that was held by Communications Holdings. The Company

shall pay the share transfer payment to Communications

Holdings by way of cash within 30 working days after this

equity transfer agreement becomes unconditional.

Profit and loss and

arrangements during the

transitional period

The period between the date immediately following the

valuation date of Ningchang Zhenli (30 September 2014) in

relation to this transfer of equity interest and the completion

date of the transfer of such equity shall be the transitional

period.

— 26 —


The transaction price of this transfer of equity interest shall

be the asset valuation results of Ningchang Zhenli using the

income approach. In light of this, the parties confirm that

the profit and loss of Ningchang Zhenli arising during the

transitional period will be enjoyed or borne by the Company.

Conditions precedent (1) This agreement and the transaction and transaction

price contemplated hereunder having been approved

by the shareholders in the general meeting of the

Company.

(2) The transaction under this agreement having been

approved or registered by the state-owned assets

management department.

(3) All conditions precedent under the Debt Transfer

Agreement between the Company and Ningchang

Zhenli having been satisfied.

Liability of Breach Upon this agreement becomes unconditional, the parties

shall actively perform their obligations. Any action in breach

of a provision of this agreement will constitute a default.

Defaulting party shall compensate the non-defaulting party

accordingly.

(2) The principal terms of the debt transfer agreement (the “Debt Transfer Agreement”)

between the Company and Ningchang Zhenli:


Party B : Ningchang Zhenli

Completion date of

the transfer of debts

The date of registration of the relevant business registration

procedures as stipulated under the Ningchang Zhenli Equity

Transfer Agreement entered into between the Company and

Communications Holdings shall be the completion date of

the transfer of debts under this agreement.

— 27 —


Debts to be transferred The parties confirm that, at the completion date, all the

interest-bearing borrowings of Ningchang Zhenli shall be

transferred to the Company. These do not include interest-

bearing borrowings and interest accrued that became due but

remained unpaid at the completion date. The due but unpaid

borrowings and interest accrued as at the completion date

shall continue to be borne by Ningchang Zhenli.

Arrangement during the

transitional period

(1) The parties confirm that, the period between the date

immediately following 30 September 2014 and the

completion date shall be the transitional period.

(2) The amount of debt to be transferred between the

parties shall be the actual amount of all interest-

bearing borrowings of Ningchang Zhenli at the

completion date. The interest-bearing borrowings

which are voluntarily repaid by Ningchang Zhenli

during the transitional period shall not to be borne

by the Company; whereas any new interest-bearing

borrowings incurred by Ningchang Zhenli during the

transitional period shall be borne by the Company in

accordance with this agreement.

(3) Before the completion date, apart from the existing

creditors, Ningchang Zhenli shall not borrow any

loans from third parties.

(4) During the transitional period, Ningchang Zhenli

shall carry out financing according to the principle of

reasonableness and appropriateness, and shall ensure

that the total amount of interest-bearing borrowings

shall not exceed RMB7,500 million.

(5) The parties shall confirm the principal amount of

all interest-bearing borrowings to be transferred by

written confirmation on the completion date.

— 28 —


Method of Transfer

of debts and

limitation period

The parties confirm that, at the completion date, the

Company shall enter into loan agreements and related

supplementary agreements with the creditors in respect of

the transfer of all interest-bearing borrowings pursuant to

the terms of this agreement. The terms and conditions of

the loan agreements shall be determined through amicable

negotiations between the Company and the creditors. At such

time, the loan agreements between Ningchang Zhenli and the

creditors shall cease to have effect simultaneously.

Arrangements for charge,

pledge and guarantee

Ningchang Zhenli undertakes that, in respect of the pledges

of the concession right for the subsisting debts to be

transferred, to the extent that they are provided by Ningchang

Zhenli and remain effective, Ningchang Zhenli shall continue

to bear its obligation concerning such pledge in favour of

the creditors in accordance with the original agreements. In

respect of guarantees provided by Communications Holdings,

so long as the guarantee periods subsist, Communications

Holdings shall continue its obligations and comply with the

terms under the original guarantee documents and continue

to provide the guarantees.

Conditions precedent (1) This agreement, the transfer of debts and the amount

to be transferred as contemplated under this agreement

having been approved by the shareholders in the

general meeting of the Company.

(2) All conditions precedent under the Ningchang Zhenli

Equity Transfer Agreement between the Company and

Communications Holdings having been satisfied.





accordingly.

— 29 —


(3) The principal terms of the profit compensation agreement (the “Profit Compensation

Agreement”) between the Company and Communications Holdings in respect of the

affiliated transaction of Ningchang Zhenli:


Party B: Communications Holdings

Compensation Period Given that the acquisition of Ningchang Zhenli is expected

to be completed within year 2015, Communications Holdings

agreed that the compensation period and period of guarantee

of responsibility shall be three accounting years, from 2015

to 2017.

Profit forecast and

computation of amount

According to the Affiliated Transactions Guidelines and

other relevant regulations issued by the Shanghai Stock

Exchange, given that the consideration for the entire equity

interests of Ningchang Zhenli is based on the valuation

result using the income approach, and exceeds its net book

value by over 100%, within the three accounting years after

the completion of the current transactions, Communications

Holdings is required to compensate the Company for the

shortfall of the actual profit from the profit forecast. Orient

Appraisal has issued Hu Dong Zhou Zi Ping Bao Zi [2014]

No. 0922044 “Asset Valuation Report” to project the net

profit of Ningchang Zhenli after deducting non-recurring

gains and losses in years 2015, 2016 and 2017.

Given that after the completion of the acquisition, the

Company shall bear all interest-bearing borrowings of

Ningchang Zhenli, this will cause major changes between the

actual operations of Ningchang Zhenli and the assumptions

in the abovementioned Asset Valuation Report and therefore

lead to a major difference in the actual net profit of

Ningchang Zhenli and the predicted net profit income tax

and financial expenses set out in Asset Valuation Report.

— 30 —


The parties confirm that, Communications Holdings

shall, in respect of the compensation period, guarantee

Ningchang Zhenli’s profit before tax and financial expenses

after deducing non-recurring gains and losses, such that

it shall not be less than RMB230,434,300 in 2015, not

less than RMB269,083,700 in 2016 and not less than

RMB299,931,100 in 2017. Such guaranteed amounts are

consistent with the projected profits before tax and financial

expenses after deducting non-recurring gains and losses set

out in the Asset Valuation Report.

Computation of

compensation amount

After the end of each accounting year during the

compensation period, the Company shall instruct an

accounting firm with securities qualification to carry out

annual auditing of the Company and at the same time, issue

specific audited report to confirm the actual profit before tax

and financial expenses after deducting non-recurring gains

and losses achieved by Ningchang Zhenli.

Compensation method and

arrangement

If Communications Holdings is required to make any profit

compensation, Communications Holdings shall compensate

the Company such shortfall amount in the profit in cash,

within 30 days after the specific audit report is issued.

Conditions precedent (1) All conditions precedent under the agreement on

which the transaction and the transaction price are

based having been satisfied, which means that the

Ningchang Zhenli Equity Transfer Agreement between

the Company and Communications Holdings having

taken effect and the Debt Transfer Agreement between

the Company and Communications Holdings becomes

unconditional.

(2) The relevant business registration in respect of the

capitalisation of the debt against Ningchang Zhenli as

a result of the transfer of interest-bearing borrowings

to the Company from Ningchang Zhenli having been

completed.

— 31 —






accordingly.

(4) The principal terms of the three equity transfer agreements (collectively, the “Xiyi

Company Equity Transfer Agreements”) entered into between Guangjing Xicheng, a

subsidiary of the Company, and Communications Holdings, Changzhou Expressway

and Wuxi Expressway, respectively, in relation to the acquisition of Xiyi Company:

Signatories Party A: Guangjing Xicheng

Party B: Communications Holdings,

Changzhou Expressway, Wuxi Expressway

Consideration Guangjing Xicheng shall pay a sum of RMB519,010,000

to Communications Holdings as the consideration for

the transfer of the 78.40% of the equity interest of Xiyi

Company held by Communications Holdings, a sum

of RMB31,910,000 to Changzhou Expressway as the

consideration for the transfer of the 4.82% of the equity

interest of Xiyi Company held by Changzhou Expressway

and a sum of RMB111,080,000 to Wuxi Expressway as the

consideration for the transfer of the 16.78% of the equity

interest of Xiyi Company held by Wuxi Expressway.

Guangjing Xicheng shall pay Communications Holdings,

Changzhou Expressway and Wuxi Expressway the relevant

consideration by way of cash within 30 working days after

these agreements become unconditional.

Arrangements during

the transitional period

The period between the date immediately following the

valuation date of the target company (30 September 2014) in

relation to this transfer of equity interest and the completion

date of the transfer of such equity shall be the transitional

period.

The transaction price of this transfer of equity interest

has adopted the results from the asset valuation on Xiyi

Company using the income approach. In light of this, the

parties confirm that the profit and loss of Xiyi Company

arising within the transitional period will be enjoyed or

borne by Guangjing Xicheng.

— 32 —


Conditions precedent (1) As part of the significant affiliated transaction of the

Company, these agreements and the transactions and

the transaction prices contemplated hereunder having

been approved by the shareholders in the general

meeting of the Company.

(2) The transaction contemplated under these agreements

having been approved or registered by the state-owned

assets management department.

Liability of Breach Upon these agreements become unconditional, the parties


of a provision of these agreements will constitute a default.


accordingly.

(5) The principal terms of the absorption and merger agreement (the “Absorption and

Merger Agreement”) entered into between Guangjing Xicheng, a subsidiary of the

Company and Xiyi Company in relation to the merger:

Signatories Party A: Guangjing Xicheng

Party B: Xiyi Company

Method of absorption and

merger

Guangjing Xicheng shall transfer all assets, liabilities,

business and personnel of Xiyi Company to Guangjing

Xicheng. Upon the absorption and merger, Guangjing

Xicheng, as the absorber, will continue to exist and Xiyi

Company, as the absorbee, will cease to exist.

Arrangement of credit and

debt

After approvals have been obtained from the board of

directors and the shareholders of Xiyi Company, Xiyi

Company shall carry out notification and announcement

procedures in respect of the creditors according to the legal

requirements. With effect from the date of deregistration

of Xiyi Company with the relevant State Administration

of Industry and Commerce, Guangjing Xicheng shall be

responsible for those debts which creditors fails to petition

for early repayment or provision of guarantee by Xiyi

Company within statutory period.

— 33 —


Conditions precedent (1) As part of the significant affiliated transaction of the

Company, this agreement and the transaction and the

transaction price contemplated hereunder having been

approved by the shareholders in the general meeting

in the Company.

(2) All conditions precedent under the Xiyi Company

Equity Transfer Agreements entered into between

Guangjing Xicheng and Communications Holdings,

Changzhou Expressway and Wuxi Expressway,

respectively, having been satisfied.





accordingly.

VII. THE PURPOSE OF THE CONNECTED AND MAJOR TRANSACTION AND THE

EFFECT ON THE COMPANY

(1) The purpose and necessity of the Transactions

i. Deepening the development strategy of the principal business of the Company

and strengthening its leading position in the expressway network of Southern

Jiangsu

The Transactions, through the addition of two core passageways in the Southern

Jiangsu district along the Yangtze Riverside and along Shanghai and Nanjing, being

two major industrial areas into the Company’s profile, will assist the Company in

expanding its principal business in toll road and bridges. This will be strategical

in further strengthening the leading position of the Company in the expressway

network in Southern Jiangsu.

— 34 —


ii. Fulfilling the trend of reform for state-owned enterprises

The current trend of reform for state-owned enterprises is to increase state-owned

asset restructuring and resources consolidation, which will in turn increase the

competiveness of enterprises, improve the standard of securitization of state-owned

assets and optimize and strengthen the standard of state-owned listed holding

companies. By acquiring Ningchang Zhenli and acquiring, absorbing and merging

with Xiyi Company through Guangjing Xicheng, a subsidiary of the Company,

the Company will be able to consolidate the core expressway assets within the

region, increase its scale of assets and its operational efficiency and ensuring the

continuing profitability of the Company.

iii. Compensating the effect of diversions to parallel highways

Ningchang Expressway is a diversion road of certain sections of Shanghai-Nanjing

Expressway which lies to the west of Wuxi and the two highways are practically

parallel. The opening of Lishui-Ma’anshan Expressway at the end of 2013, which

gradually diverted trucks in the areas along Anhui to southern Jiangsu from western

section of Shanghai-Nanjing Expressway to Ningchang Expressway, lead to rapid

growth in the traffic flow of Ningchang Expressway and a continuous year-on-

year reduction of truck flow of the western section of Ningchang Expressway.

Between January and September 2014, the traffic flow of Ningchang Expressway

recorded a year-on-year increase of 57.51% (during the eleven months ended 30

November 2014, the daily average traffic flow of Ningchang Expressway increased

by 59.81% as compared to the same period in 2013, whereas in 2013 the increase

was merely 9.29% as compared to that in 2012), and it is expected that the traffic

flow of Ningchang Expressway will continue to grow in the future. By acquiring

Ningchang Zhenli, the Company can compensate the loss in traffic flow on the

certain section of Shanghai-Nanjing Expressway which lies to the west of Wuxi

due to diversion and effectively control the traffic flow of expressways within the

Shanghai-Nanjing passageway.

— 35 —


iv. Fully utilizing the sound investment and financing ability and realising the

financial synergy effect of the Company and Guangjing Xicheng

The businesses of the Company and Guangjing Xicheng are in sound conditions,

a sufficient cash flow have been maintained and profit from principal businesses

and revenue from investment recorded a stable growth. As at 30 September 2014,

the gearing ratios of the Company and Guangjing Xicheng were relatively low,

at approximately 23.39% and 12.47%, respectively, and the companies retained a

good credit rating and relatively strong financing ability. Upon the completion of

the Transactions, the Company and Guangjing Xicheng will be able to prepay, with

the companies’ own cash, debts undertaken from acquisition targets before they fall

due, or replace debt undertaken from acquisition targets with financing of lower

interest rates. By repaying debts before they fall due or replacing debts and other

policies, the Company can quickly assimilate the debts undertaken pursuant to the

Transactions and will be able to realise the financial synergies effect and ensure the

continuing profitability of the Company.

v. Seizing the opportunity to maximize the value of shareholders’ investment

Firstly, in light of the continued increase in the price of various construction

materials, cost of land acquisition and demolition and labour cost, after analysis,

it is considered that the construction cost of newly constructed expressways

in the South Jiangsu region of similar grade, width and length as the target of

the acquisition would be substantially higher than the acquisition price for the

Transactions. The acquisition would be beneficial to the Company in controlling

longer toll road assets with lower costs.

Moreover, the initial traffic flow for newly constructed expressways would be less

and an incubation period of several years would be required. Given that the two

expressways under Ningchang Zhenli had completed their construction and have

been open to traffic since September 2007, the traffic flow of the expressways

has already entered a period of rapid growth (during the eleven months ended 30

November 2014, the daily average traffic flow of Ningchang Expressway increased

by 59.81% as compared to the same period in 2013, whereas in 2013 the increase

was merely 9.29% as compared to that in 2012). The Xiyi Expressway under

Xiyi Company had completed its construction and has been open to traffic since

September 2003, the traffic flow of the expressway has already entered a period of

stable growth. Huantaihu Expressway had completed its construction and has been

open to traffic since 2006, the traffic flow of the expressway has already entered a

period of rapid growth.

— 36 —


In light of the above, this would be the best time to undertake the acquisitions

given the relatively low cost of acquisitions of the Transactions and the existence

of room for growth of the acquired expressway assets in the future would be

beneficial to the Shareholders and thus maximizing the shareholders’ value of the

Company.

vi. Taking advantage of the tax policy to enhance the investment profitability of

the Transactions

On one hand, upon completion of the Transactions, the Company shall undertake

all interest-bearing borrowings of Ningchang Zhenli and capitalise such debts

into equity interests in Ningchang Zhenli. It is estimated that from the year when

the Transactions are completed and going onwards, Ningchang Zhenli will be

able to record profit upon the completion of the capitalisation, which would then

enable the Company to utilize the relevant policy which stipulates that any profits

before tax can be used to recover the cumulative loss for the previous five years

before the payment of enterprise income tax, therefore enabling the exemption or

reduction in enterprise income tax. On the other hand, after the undertaking of all

interest-bearing borrowings from Ningchang Zhenli by the Company and after the

undertaking of all debts by Xiyi Company after Guangjing Xicheng’s merger with

Xiyi Company, the Company and Xiyi Company will bear additional financial

costs which can lead to a deduction in the income tax payable by the Company

and Guangjing Xicheng. Through taking advantage of the current tax policies, the

Transactions can enhance its investment profitability which coincide with the goal

of maximizing the shareholders’ interest.

vii. Fully utilizing the economies of scale to effectively reduce the operation and

management cost

By absorbing and merging with Xiyi Company, not only can Guangjing Xicheng,

the subsidiary of the Company, strengthen its dominant position as a North-

South passageway within the Jiangsu Province and expand Guangjing Xicheng’s

principal business of toll roads and bridges, but also given that the total length

of expressways under the management of Guangjing Xicheng is relatively short

(about 52 km) and such expressways are close to the Xiyi Expressway, Guangjing

Xicheng can also fully utilize the economies of scales by unifying the operation,

maintenance and management of assets including Xiyi Expressway upon the

completion of the absorption and merger, thereby reducing the cost of operation,

— 37 —


management and road maintenance of highways under Xiyi Company and increase

the overall profitability of the Company. It is expected that a merger of Xiyi

Company and Guangjing Xicheng will lead to streamlining and cost savings in

both operation and administration, which will be difficult to achieve if the two

companies are to continue to operate independently. The Company considers that

the aforementioned advantages can only be fully attained through the merger and

absorption of Xiyi Company by Guangjing Xicheng, instead of by Guangjing

Xicheng solely acquiring the entire equity interest of Xiyi Company.

(2) Settlement method and effect of the Transactions on the Company

Jiangsu Express and its subsidiary Guangjing Xicheng proposed to use its own funds or

through self-financing means to pay, by way of cash, the consideration in respect of the

acquisition of Ningchang Zhenli and Xiyi Company.

i. Effect on the Company’s principal business

Shanghai-Nanjing Expressway is one of the core assets of the Company. As set

out in the 2014 interim report of the Company, affected by the opening of Lishui-

Ma’anshan Expressway at the end of 2013, which gradually diverted trucks in

the areas along Anhui to southern Jiangsu from western section of Shanghai-

Nanjing Expressway to Ningchang Expressway, the growth of the average daily

traffic volume and average daily revenue for the period has been slowing down

when compared to 2013. In particular, the western section of Shanghai-Nanjing

Expressway, which runs in parallel with Ningchang Expressway, only recorded a

year-on-year increase in the average daily traffic volume of approximately 1.46%

for the period between January to September 2014, among which a year-on-year

decrease of 8.13% was recorded in the average daily traffic volume of trucks.

By comparing the growth figures of the average daily volume of western section

of Shanghai-Nanjing Expressway for the first three quarters in 2014, we notice

that the impact of the diversion effect of Ningchang Expressway is growing each

quarter of the year.

In comparison, for the period between January to September 2014, the average

daily traffic volume of Ningchang Expressway recorded a year-on-year increase

of 57.51% while the average daily revenue recorded a year-on-year increase of

73.11%.

— 38 —


The details of the operating conditions of Ningchang Expressway for the year 2013

and nine months between January to September 2014 are as follows:

Average Daily traffic volume (vehicle/day) Average Daily toll revenue (RMB’0000/day)

Item Jan- Sep 2014

Percentage increase

compared with

the same period

in the last year 2013

Percentage increase

compared with

the same period

in the last year Jan - Sep 2014

Percentage increase

compared with

the same period

in the last year 2013

Percentage increase

compared with

the same period

in the last year

(%) (%) (%) (%)

Ningchang Expressway 18,821 57.51% 11,988 9.29% 115.76 73.11% 67.47 14.49%

Zhenli Expressway 8,613 10.28% 7,861 3.69% 57.01 8.32% 52.52 2.38%

Xiyi Expressway

(including Luma

first-class Highway)

17,340 7.64% 16,154 8.61% 68.83 8.57% 63.84 4.35%

Huantaihu Expressway 7,123 19.47% 6,157 20.30% 6.76 22.67% 5.82 14.07%

The Transactions, by acquiring Ningchang Zhenli, incorporate Ningchang

Expressway, Zhenli Expressway, Xiyi Expressway and Huantaihu Expressway into

the Company and set-off the diversion effect of other available parallel expressways

to the Company, and enable the maintenance of high growth rate of the Company’s

revenue from its toll roads, therefore coinciding with the need of the Company to

maintain a stable growth strategy.

ii. Effect on the financial condition of the Company

By these Transactions, debt asset ratio of the Company will be significantly raised

to 46.62% (based on the total figures in accountants’ report as at 30 September

2014. Please see the table below for details); however, it is still lower than the

average ratio at 47.5% of listed companies in the same industry (source of data:

Wind Info). Given the sufficient cash flow of the Company, the strong ability

in financial and repayment of debts, the capital structure of the Company shall

improve after undertaking the debts, which shall coincide with the Company’s goal

in maximizing the shareholders’ interests.

— 39 —


(Note: Insofar as the Company is aware, Wind Information Co., Ltd (“Wind

Info”) is a PRC leading integrated service provider of financial data, information,

and software headquartered in the Lujiazui Financial Center in Shanghai and

that it serves more than 90% of the financial enterprises in the PRC market,

including securities firms, fund management firms, insurance companies, banks,

and investment firms. In terms of the overseas market, it also serves 75% of

the Qualified Foreign Institutional Investors (QFII) as approved by the China

Securities Regulatory Commission. Further, insofar as the Company is aware,

many renowned financial research institutions and regulatory committees are on

Wind Info’s client list and the company’s data are frequently quoted by Chinese

and English media, in research reports, and in academic thesis. In view of the

abovementioned credentials of Wind Info, the Board considers that the relevant

statistical data provided by Wind Info are reliable.

The collection, use and distribution of the relevant data were not commissioned

by the Company, its connected person or any of their associates. The Company

has merely obtained the relevant statistical data from Wind Info and conducted

simple calculations to obtain the average figures in the manner set out below. No

particular parameters or assumptions had been made by the Company.)

Set out below is a summary of the key proforma financial data extracted from

Appendix VIA, VIB and VIC:

Unit: RMB’00,000,000

Item

Before

acquisition

After

acquiring

Ningchang

Zhenli only

After

acquiring

Xiyi Company

only

After

acquiring both

Ningchang

Zhenli and

Xiyi Company

Total assets 272.3 349.14 296.97 373.81

Total liabilities 69.75 149.54 94.49 174.28

Net assets 202.55 199.6 202.48 199.53

Debt asset ratio 25.62% 42.83% 31.82% 46.62%

— 40 —


iii. Effect on the profitability of the Company

The financial effect on the profit of the Group following completion of the

Transactions is elaborated as follows:

(1) Effect of the confirmation of deferred income tax of Ningchang Zhenli

In accordance to the latest audit report for the two years and nine months

ended 30 September 2014 of Ningchang Zhenli, given the high debt

ratio under the current capital structure, heavy financial burden and the

accumulated loss over the years of Ningchang Zhenli, the accumulated loss of

Ningchang Zhenli as at 30 September 2014 amounted to RMB1,723,169,400

and deductible temporary difference was RMB38,232,200. As it is estimated

that Ningchang Zhenli will not be able to make up for the loss with profits

in the future, in accordance with the relevant accounting standards for

enterprises, Ningchang Zhenli did not confirm the relevant deferred income

tax assets.

Upon the completion of the Transactions, through undertaking all interest-

bearing borrowings of Ningchang Zhenli and performing the capitalisation

of the debts into equity by the Company, the financial burden of Ningchang

Zhenli will be reduced and it is estimated that Ningchang Zhenli will record

a turnaround in the year when the Transactions are completed, and will

continue to experience profit going forward. In accordance with the relevant

accounting standards for enterprises, Ningchang Zhenli fulfils the relevant

condition for confirming the deferred income tax assets and therefore will be

able to confirm the corresponding deferred tax assets based on the estimated

recoverable amount of loss and significantly improving the results of

operation for the year the Transactions are completed.

(2) Consolidated effect of the Transactions on the profits of the Company in the

future

Due to the fact that Ningchang Zhenli and Xiyi Company have been

experiencing losses continuously for the past few years, their debt burden

would be heavier and higher finance cost would be incurred. However, given

the likely growth in traffic volume of passenger vehicles for expressways

controlled by Ningchang Zhenli and Xiyi Company in the future (pursuant

to the traffic consultant’s report, the average increase in the traffic volume

of the relevant expressways during the remaining term of the concession

— 41 —


period shall be approximately 10%), as well as taking into consideration the

positive influence of the financial synergies effect and taxation synergies

effect of the Transactions, not only would the Transactions be significant to

the Company’s future strategic layout, but they could also lead to a positive

effect on the profitability of the Company. Taking into account the forecast

on traffic volume, revenue and operating costs and expenses of Ningchang

Zhenli and Xiyi Company, the interest savings on the gradual restructuring of

Ningchang Zhenli’s interest-bearing borrowings and the expected recognition

and usage of deferred tax assets, the discount rates used by American

Appraisal for the purpose of assessing the valuation of Ningchang Zhenli

and Xiyi Company are 9.5% and 10%, respectively, further details of which

are set out in the Appendices IVA and IVB to this circular, and hence it is

expected that the Company would enjoy an internal rate of return of over

10% on each of these two projects after the completion of the Transactions.

VIII. THE APPROVAL PROCEDURE FOR THE PERFORMANCE OF THE

TRANSACTIONS

(1) The completed approval procedures in respect of the Transactions

1. On 30 December 2014, the Company convened the 17th meeting of the 7th session

board of directors which approved “The proposal in respect of the acquisition of

100% shareholding of Ningchang Zhenli by Jiangsu Expressway and to acquire

all interest-bearing borrowings of Ningchang Zhenli”, “The proposal in respect

of absorption and merger of Xiyi Company by Guangjing Xicheng” and “The

proposal in respect of the written audit opinion of the audit committee of the board

of directors of Jiangsu Expressway”. The related directors of the Company, Chen

Xiang Hui, Du Wen Yi and Qian Yong Xiang had abstained from voting in the

meeting. The proposals were passed by the non-related directors of the Company.

Save as disclosed above, none of the Directors had any material interest in the

Transactions and hence none of the Directors were required to abstain from voting.

The independent directors of the Company, Messrs. Xu Chang Xin, Zhang Er

Zhen, Chen Dong Hua and Gao Bo gave prior approval to the Transactions and

issued an independent opinion in accordance with the relevant requirements

under the Shanghai Listing Rules and related regulations: “After considering the

terms and conditions of the relevant documents of the Transactions, the interests

of independent shareholders, advice of Hongyuan Securities Company Limited,

the onshore independent financial adviser, we are of the opinion that the terms

— 42 —


of the Transactions are determined after arm’s length negotiation, are on normal

commercial terms, are fair and reasonable to the Company and the independent

shareholders and are in the interest of the Company and its Shareholders as a

whole. Hence, we recommend the independent shareholders to vote in favour of

the resolutions to be proposed at the extraordinary general meeting to approve the

Transactions.”

The audit committee of the board of directors of the Company issued a written

audit opinion in respect of this affiliated transaction in accordance with the relevant

requirements under the Shanghai Listing Rules and related regulations: “Upon

diligent auditing, we are of the opinion that this affiliated transaction makes use of

our advantage in financing to incorporate the toll road assets, including Ningchang

Expressway, Zhenli Expressway and Xiyi Expressway into the Company. This is

consistent with the need of the strategic development of the Company. The pricing

of this affiliated transaction is fair and reasonable without prejudice to the interests

of the Company and non-related shareholders, in particular interests of minority

shareholders.”

After considering the purpose of the Transactions and their effect on the Company,

the directors of the Company consider that the Transactions are determined after

arm’s length negotiation, are on normal commercial terms, and are in the interests

of the Company and the shareholders as a whole.

2. On 30 December 2014, Guangjing Xicheng convened the 30th shareholders’

meeting and approved “The Proposal on absorption and merger of Xiyi Company

by Guangjing Xicheng”.

3. On 8 January 2015, the relevant transfers concerning state-owned assets as

contemplated under the Transactions have been approved by State-Owned Assets

Supervision and Administration Commission of Jiangsu Province.

(2) The pending approval procedures for the Transactions

According to the relevant regulations of China Securities Regulatory Commission,

Shanghai Stock Exchange and Articles of Association, the following approval procedures

are yet to be performed for this affiliated transaction:

The Transactions shall be approved by the shareholders in the general meeting of the

Company. Shareholders who are related to the Transactions shall abstain from voting in

the relevant proposal in the general meeting.

— 43 —


IX. WAIVER FROM STRICT COMPLIANCE WITH THE HONG KONG LISTING

RULES

(1) Waiver of inclusion of the valuation reports prepared by Orient Appraisal (“Orient

Appraisal Valuation Reports”)

The Company has applied for and was granted a waiver from the strict compliance with

the requirement to include the valuation reports of Orient Appraisal into the circular to be

issued by the Company to its shareholders pursuant to Rules 14.62, 14.66(2), 14A.68(7),

14A.70(13) and Paragraph 29(2) of Appendix B of the Hong Kong Listing Rules in

respect of the Transactions.

The basis of such a waiver is as follows:

1. the appointers of Orient Appraisal are the vendors in the Transactions and not

the Company. The Company was not involved in preparing the Orient Appraisal

Valuation Reports. Therefore, the Company should not take responsibility of its

content;

2. while the consideration was based on the Orient Appraisal Valuation Reports under

PRC regulations as required under PRC law, the Company’s board has preliminarily

considered other factors when assessing the Transactions, including the American

Appraisal’s preliminary valuation and the other factors as more detailed disclosed

in the section headed “VII. The purpose of the connected and major transaction and

the effect on the Company” above;

3. American Appraisal’s valuation report commissioned by the Company will be

included in the Company’s Circular to its shareholders to satisfy the requirements

of Rules 14.62, 14.66(2), 14A.68(7), 14A.70(13) and Paragraph 29(2) of Appendix

B of the Hong Kong Listing Rules;

4. an independent financial advisor has been appointed to advise the independent

board committee and independent shareholders in respect of the Transactions; and

5. it is onerous and burdensome for the Company to include the Orient Appraisal

Valuation Reports (which were commissioned by the vendors) in the Company’s

circular as this involves additional time and cost and does not add much value

for the shareholders and investors in considering the transactions and the

presentation of the Orient Appraisal Valuation Reports in the Company’s circular

to shareholders will cause confusion to H share shareholders, especially those

shareholders who are not familiar with state-owned assets valuation.

— 44 —


(2) Waiver for the presentation of Directors’ and auditors’ confirmation

On the basis that the Directors did not instruct Orient Appraisal to prepare the Orient

Appraisal Valuation Reports, it is unreasonable and onerous to require the Company to

comply with the requirements under Rule 14.62 of Hong Kong Listing Rules.

In light of the above circumstances, the Company has applied to the Hong Kong Stock

Exchange and was granted a waiver from strict compliance with the requirements of

Rule 14.62 of the Hong Kong Listing Rules such that the Directors and auditors of the

Company are exempted from making the confirmations required under Rule 14.62 prior

to the issue of the Announcement. The Directors and the auditors of the Company are

required to submit the relevant confirmation prior to the despatch of the circular to be

issued by the Company.

X. THE COMPENSATION UNDERTAKING LETTER FROM THE RELATED PARTY

According to the Affiliated Transactions Guidelines and other relevant regulations issued by

the Shanghai Stock Exchange, the consideration in respect of 100% of the equity interest of

Ningchang Zhenli is determined by income approach valuation, which exceeds its net book

value by over 100%. Communications Holdings made the following undertaking as to the profit

of Ningchang Zhenli in the coming three years:

“According to Hu Dong Zhou Zi Ping Bao Zi [2014] No. 0922044 “Asset Valuation Report”

issued by Orient Appraisal Co., Ltd, the net profit of Ningchang Zhenli after deducting non-

recurring gains and losses are -RMB229,298,300, -RMB186,095,100 and -RMB147,211,900 for

the years 2015, 2016 and 2017 respectively.

Given that after the completion of the current transactions, the Company shall bear all

interest-bearing borrowings of Ningchang Zhenli and capitalise such debts into equity,

this will cause major changes between the actual operations of Ningchang Zhenli and the

assumptions in the abovementioned Asset Valuation Report and therefore lead to a major

difference in the actual net profit of Ningchang Zhenli and the predicted net profit income

tax and financial expenses set out in the Asset Valuation Report. Communications Holdings

has, in respect of the compensation period, guaranteed Ningchang Zhenli’s profit before tax

and financial expenses after deducing non-recurring gains and losses, such that it shall not be

less than RMB230,434,300 in 2015, not less than RMB269,083,700 in 2016 and not less than

RMB299,931,100 in 2017. Such guaranteed amounts are consistent with the profits before tax

and financial expenses of Ningchang Zhenli after deducting non-recurring gains and losses set

out in the Asset Valuation Report.”

— 45 —


The profit before tax and financial expenses after deducting non-recurring gains and losses

during the year ended 31 December 2013 of Ningchang Zhenli was RMB16,130,000 whereas the

profit before tax and financial expenses after deducting non-recurring gains and losses during

the year ended 31 December 2014 of Ningchang Zhenli was expected to be approximately

RMB146,480,000.

The guaranteed amount under the relevant profit compensation arrangement was determined

pursuant to the profit forecast of a qualified state-owned assets valuer which is recognised

by the State-Owned Assets Supervision and Administration Commission and possesses the

appropriate experience and capability in assessing toll income from expressways. Further, the

assumptions and valuation methods and procedures adopted by such valuer were in line with

the actual circumstances and the standard practice. Although the state-owned assets valuer’s

valuation report was not prepared by the Company, the valuation report was prepared based on

the projected toll income and estimated operation costs figures provided by a traffic consultant

experienced in the Southern Jiangsu district network which were in turn prepared based on

appropriate assumptions. Further, such state-owned assets valuation report had been strictly and

independently reviewed by the State-Owned Assets Supervision and Administration Commission

of Jiangsu Province to ensure that the guaranteed amount is fair and reasonable. In light of the

above, the Board considers that the estimated guaranteed amount is fair and reasonable and in

the interest of the Company and the Shareholders as a whole.

In the event that the Company becomes aware of a failure to meet the relevant profit guarantee

as mentioned above, the Shareholders will be informed, by way of an announcement to be

published by the Company on the Company’s website and the Hong Kong Stock Exchange’s

website pursuant to Rule 14A.63 of the Hong Kong Listing Rules. Further, pursuant to the

relevant Shanghai Listing Rules, for each of the three years following the completion of the

Transactions, the Company is required to set out the differences of the actual profit and the

estimated profit in respect of the relevant assets (if any) in its annual report, and the accountants

of the Company have to issue the specific audited report.

XI. CLOSURE OF REGISTER

Registration of transfers of H Shares will be suspended by the Company from 10 February 2015

to 12 March 2015 (both days inclusive). Holders of H Shares who wish to be eligible to attend

the Extraordinary General Meeting must deliver their instruments of transfer together with the

relevant share certificates to Hong Kong Registrars Limited, the Registrar of H Shares of the

Company, at Shops 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan

Chai, Hong Kong, no later than 4:30 p.m. on Monday, 9 February 2015.

— 46 —


XII. EXTRAORDINARY GENERAL MEETING

The 2015 First Extraordinary General Meeting of the Company will be held at the Conference

Room of the Company, at 6 Xianlin Avenue, Nanjing, the PRC on Thursday, 12 March 2015 at

2:30 p.m. A notice of the meeting is set out in page 529 to page 533 of this circular.

The two transactions constituting the Transactions will be proposed separately at the

Extraordinary General Meeting for the Independent Shareholers’ approval as follows:

1. “THAT the acquisition of the entire equity interest in Ningchang Zhenli by the Company

for a consideration of RMB502,000,000 pursuant to the terms of the Ningchang Zhenli

Equity Transfer Agreement, together with the transfer of all the debts of Ningchang

Zhenli (not exceeding RMB7,500,000,000) to the Company, and the capitalization of

such debts into equity in accordance with the applicable laws, pursuant to the terms of

the Debt Transfer Agreement, be and are hereby approved (the “Resolution in respect of

the acquisition of the entire equity interest in Jiangsu Ningchang Zhenli Expressway

Company Limited by Jiangsu Expressway Company Limited together with the

transfer of all the debts of Jiangsu Ningchang Zhenli Expressway Company Limited

and the capitalization of such debts into equity”), and to authorise Mr. Qian Yong

Xiang, a director of the Company, to deal with the matters related thereto”; and

2. “THAT the acquisition of the entire equity interest in Xiyi Company by Jiangsu

Guangjing Xicheng for an aggregate consideration of RMB662,000,000 pursuant to the

terms of Xiyi Company Equity Transfer Agreements, together with the merger of Xiyi

Company by Guangjing Xicheng pursuant to the terms of the Absorption and Merger

Agreement, be and are hereby approved (the “Resolution in respect of the merger and

absorption of Jiangsu Xiyi Expressway Company Limited by Jiangsu Guangjing

Xicheng Expressway Company Limited”), and to authorise Mr. Qian Yong Xiang, a

director of the Company, to deal with the matters related thereto.”

Any Shareholder with a material interest in the Transactions and his associates will abstain

from voting on the relevant resolutions. Other than Communications Holdings who is, as at

the Latest Practicable Date, the holder of 2,742,578,825 shares of the Company (representing

approximately 54.44% of the issued shares of the Company) as at the Latest Practicable Date,

no Shareholder is required to abstain from voting in respect of relevant resolutions in the

Extraordinary General Meeting.

All resolutions will be passed by way of poll.

— 47 —


For holders of H Shares, whether or not you are able to attend the meeting, you are requested

to (i) complete the accompanying confirmation slip in accordance with the instructions printed

thereon and return the same to the Company no later than 19 February 2015, and to (ii)

complete the accompanying form of proxy in accordance with the instructions printed thereon

and return the same to the Company not less than 24 hours before the time appointed for

holding the meeting. Completion and return of the form of proxy will not preclude holders of

the H Shares from attending and voting at the meeting. Under these circumstances, the holders

of H Shares will be deemed as having withdrawn the appointment of the proxy.

The form of proxy for domestic shareholders of the Company will be published on China

Securities Journal, Shanghai Securities News and the websites of the Company (www.

jsexpressway.com). Domestic shareholders of the Company are requested to complete and sign

the form of proxy in accordance with the instructions printed thereon and return the same to the

registered office of the Company.

XIII. RECOMMENDATION

Having considered the reasons set out in this circular, the Directors, including the independent

non-executive Directors (having considered the advice of the Independent Financial Adviser),

are of the opinion that the terms of the Transactions are fair and reasonable and in the interests

of the Shareholders as a whole. Accordingly, the Directors recommend the Independent

Shareholders to vote in favour of the relevant resolutions.

The Independent Board Committee comprising the independent non-executive Directors (namely,

Mr. Zhang Erzhen, Mr. Xu Chang Xin, Mr. Gao Bo and Mr. Chen Donghua) has been appointed

to consider the Transactions. The Independent Financial Adviser, Guotai Junan, has been

appointed to advise the Independent Board Committee and the Independent Shareholders on the

fairness and reasonableness of terms of the Transactions. Your attention is drawn to (i) the letter

setting out the advice from the Independent Board Committee to the Independent Shareholders,

and (ii) the letter of advice from the Independent Financial Adviser setting out its advice to the

Independent Board Committee and the Independent Shareholders in relation to the terms of the

Transactions; and (iii) additional information set out in other parts of this circular.

Yours faithfully,

By order of the board

Jiangsu Expressway Company Limited

Yao Yong Jia

Secretary to the Board of Directors

— 48 —

LETTER FROM THE INDEPENDENT BOARD COMMITTEE



Independent non-executive Directors: Registered Office:

Zhang Erzhen 6 Xianlin Avenue

Xu Chang Xin Qixia District

Gao Bo Nanjing

Chen Donghua Jiangsu

PRC

23 January 2015

To the Independent Shareholders

Dear Sir or Madam,


We have been appointed as members of the Independent Board Committee to advise you in respect of

the Transactions (as defined in the circular of the Company dated 23 January 2015) (the “Circular”).

We refer to the Circular of which this letter forms part. Capitalised terms defined in the Circular shall

have the same meanings when used in this letter, unless the context otherwise requires.

We wish to draw your attention to the letter from the Board as set out on pages 1 to 47 of the Circular

which sets out, among other things, information on the Transactions, the letter from the Independent

Financial Adviser set out on pages 50 to 92 of the Circular which contains its advice to us and to you

in relation to the Transactions, as well as other additional information set out in other parts of the

Circular.

— 49 —

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having taken into account the advice of the Independent Financial Adviser, we consider that the

Transactions are in the interests of the Group and the Shareholders as a whole and that they are on

normal commercial terms and the terms thereof are fair and reasonable so far as the Independent

Shareholders are concerned. We therefore recommend the Independent Shareholders to vote in favour

of the ordinary resolutions to be proposed at the Extraordinary General Meeting to approve the

Transactions.

Yours faithfully,

Independent Board Committee

Zhang Erzhen Xu Chang Xin Gao Bo Chen Donghua

Independent

non-executive

Independent

non-executive

Independent

non-executive

Independent

non-executive

Director Director Director Director

— 50 —

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of the letter of advice from the Independent Financial Adviser to the

Independent Board Committee and the Independent Shareholders in relation to the Ningchang Zhenli

Equity Transfer Agreement, the Debt Transfer Agreement, the Profit Compensation Agreement, the

Xiyi Company Equity Transfer Agreement, the Absorption and Merger Agreement and the transactions

contemplated thereunder for the purpose of incorporation in this Circular.

27th Floor, Low Block,

Grand Millennium Plaza

181 Queen’s Road Central

Hong Kong

23 January 2015

To the Independent Board Committee and

the Independent Shareholders

Dear Sirs,


INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board

Committee and the Independent Shareholders in relation to (i) the Ningchang Zhenli Equity Transfer

Agreement, the Debt Transfer Agreement, the Profit Compensation Agreement and the transactions

contemplated thereunder (collectively referred to as “Ningchang Zhenli Transaction”); and (ii) the

Xiyi Company Equity Transfer Agreement, the Absorption and Merger Agreement and the transactions

contemplated thereunder (collectively referred to as “Xiyi Company Transaction”), details of which

are set out in the letter from the Board (the “Letter from the Board”) contained in the circular of the

Company dated 23 January 2015 (the “Circular”) of which this letter forms part. Unless the context

requires otherwise, capitalised terms used herein shall have the same meanings as those defined in the

Circular.

— 51 —


On 31 December 2014, the Board made an announcement (the “Announcement”) in relation to (i)

the Company entering into the Ningchang Zhenli Equity Transfer Agreement, pursuant to which the

Company has agreed to acquire the entire equity interest in Ningchang Zhenli held by Communications

Holdings, the controlling Shareholder of the Company, at cash consideration of RMB502,000,000

(equivalent to approximately HKD636,560,000). At the same time, the Company and Ningchang

Zhenli entered into the Debt Transfer Agreement, pursuant to which all Ningchang Zhenli’s interest-

bearing borrowings as at the completion date of the Ningchang Zhenli Equity Transfer Agreement, not

exceeding RMB7,500,000,000 (equivalent to approximately HKD9,500,000,000), shall be assigned

to the Company. Following the assignment of all Ningchang Zhenli’s interest-bearing borrowings,

the Company shall capitalise such debts into equity in accordance with the applicable laws; and (ii)

Guangjing Xicheng, a 85%-owned subsidiary of the Company, entering into the Xiyi Company Equity

Transfer Agreement, pursuant to which Guangjing Xicheng has agreed to acquire, in aggregate, the

entire equity interest in Xiyi Company held by Communications Holdings, Changzhou Expressway

and Wuxi Expressway at cash consideration of RMB662,000,000 (equivalent to approximately

HKD839,450,000). At the same time, Guangjing Xicheng and Xiyi Company entered into the

Absorption and Merger Agreement, pursuant to which Guangjing Xicheng shall merge with Xiyi

Company and shall take over all Xiyi Company’s assets, liabilities, business and personnel when

Guangjing Xicheng acquired the entire equity interest of Xiyi Company.

The Ningchang Zhenli Transaction and the Xiyi Company Transaction are independent to each other

and shall be considered and voted separately at the Extraordinary General Meeting. Details of the

Ningchang Zhenli Equity Transfer Agreement, the Debt Transfer Agreement, the Profit Compensation

Agreement, the Xiyi Company Equity Transfer Agreement and the Absorption and Merger Agreement

are set out in the Letter from the Board. Upon completion of the Ningchang Zhenli Transaction,

Ningchang Zhenli will become a wholly-owned subsidiary of the Company. Following the assignment

of all Ningchang Zhenli’s interest-bearing borrowings to the Company pursuant to the Debt Transfer

Agreement, the Company shall capitalise such debts into equity in accordance with the applicable

laws. Upon completion of the acquisition of the entire equity interest in Xiyi Company, Guangjing

Xicheng shall absorb and merge with Xiyi Company and Xiyi Company will cease to exist.

As at the Latest Practicable Date, Communications Holdings directly holds 2,742,578,825 shares of

the Company, representing approximately 54.44% of the issued share capital of the Company, and

Communications Holdings holds the entire equity interest in Ningchang Zhenli and approximately

78.40% equity interest in Xiyi Company. Therefore, in accordance with the Hong Kong Listing

Rules, Communications Holdings, Ningchang Zhenli and Xiyi Company are connected persons of the

Company and the Transactions constitute connected transactions under Chapter 14A of the Hong Kong

Listing Rules.

— 52 —


Given that Communications Holdings is one of the counterparties to the Ningchang Zhenli Equity

Transfer Agreement and the Xiyi Company Equity Transfer Agreement, the Directors are of the view

that the Transactions should be aggregated pursuant to Rule 14.22 and Rule 14A.81 of the Hong Kong

Listing Rules. Upon aggregating the Transactions, given that the asset ratio would be approximately

37.28%, although all other applicable ratios do not exceed 25%, the Transactions constitute a major

transaction of the Company pursuant to Chapter 14 of the Hong Kong Listing Rules and are subject

to the reporting, announcement, circular and independent shareholders’ approval requirements under

Chapter 14 and Chapter 14A of the Hong Kong Listing Rules.

The interest-bearing borrowings of Ningchang Zhenli owed to Communications Holdings and

its subsidiaries would constitute continuing connected transactions exempted from the reporting,

announcement, circular and independent shareholders’ approval requirements under Chapter 14A of

the Hong Kong Listing Rules. Also, the technical services provided by Network Operation Company

would constitute continuing connected transactions exempt from the independent shareholders’

approval requirement under Chapter 14A of the Hong Kong Listing Rules. Details of the two

continuing connected transactions have been set out in the Letter from the Board.

INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

The Independent Board Committee, comprising all of the independent non-executive Directors, namely

Mr. Xu Changxin, Mr. Gao Bo, Mr. Chen Donghua and Mr. Zhang Erzhen, has been established to

make recommendation to the Independent Shareholders in relation to the Ningchang Zhenli Equity

Transfer Agreement, the Debt Transfer Agreement, the Profit Compensation Agreement, the Xiyi

Company Equity Transfer Agreement, the Absorption and Merger Agreement and the transactions

contemplated thereunder. We, Guotai Junan Capital Limited, have been appointed as the Independent

Financial Adviser to advise the Independent Board Committee and the Independent Shareholders

as to (1) whether the terms of the Ningchang Zhenli Equity Transfer Agreement, the Debt Transfer

Agreement, the Profit Compensation Agreement, the Xiyi Company Equity Transfer Agreement and

the Absorption and Merger Agreement are fair and reasonable; (2) whether the Ningchang Zhenli

Transaction and the Xiyi Company Transaction are in the ordinary and usual course of business of the

Group; (3) whether the Ningchang Zhenli Transaction and the Xiyi Company Transaction are in the

interest of the Company and the Shareholders as a whole; and (4) how the Independent Shareholders

should vote on the ordinary resolutions to be proposed at the Extraordinary General Meeting to

approve the Ningchang Zhenli Equity Transfer Agreement, the Debt Transfer Agreement, the Profit

Compensation Agreement, the Xiyi Company Equity Transfer Agreement, the Absorption and Merger

Agreement and the transactions contemplated thereunder.

— 53 —


Apart from the normal professional fees for our services to the Company in connection with our

appointment as described above, no arrangement exists whereby we shall receive any fees and benefits

from the Group or where appropriate, any of their respective associates. We are independent from and

not connected with the Group or where appropriate, any of its respective major Shareholders, Directors

or chief executive, or any of their respective associates pursuant to Rule 13.84 of the Listing Rules. In

the past two years, there was no engagement between the Group and us. Therefore, we are qualified

to give independent advice to the Independent Board Committee and the Independent Shareholders in

relation to the Ningchang Zhenli Equity Transfer Agreement, the Debt Transfer Agreement, the Profit

Compensation Agreement, the Xiyi Company Equity Transfer Agreement, the Absorption and Merger

Agreement and the transactions contemplated thereunder.

BASIS AND ASSUMPTIONS OF OUR OPINION

In formulating our advice and recommendations to the Independent Board Committee and the

Independent Shareholders, we have relied on the statements, information, opinions and representations

contained in the Circular and provided by the Group, the Directors, the management staff of the

Group and/or their respective advisers. The Company has confirmed with us, and we have assumed

that all such statements, information, opinions and representations were true, accurate and complete

at the time they were made or given and will continue to be true, accurate and complete as at the date

of the Extraordinary General Meeting. We have also assumed that all views, opinions, projections

and representations as contained in the Circular or otherwise made or provided by the Group, the

Directors, the management staff of the Group and/or their respective advisers were reasonably made

after due and careful consideration. We have reviewed, among other things, (i) the Announcement; (ii)

the Circular; (iii) the Ningchang Zhenli Equity Transfer Agreement, the Debt Transfer Agreement, the

Profit Compensation Agreement, the Xiyi Company Equity Transfer Agreement and the Absorption

and Merger Agreement; (iv) the valuation reports in respect of Ningchang Zhenli and Xiyi Company

(the “Ningchang Zhenli AA Valuation Report” and the “Xiyi Company AA Valuation Report”

respectively and, collectively, the “AA Valuation Reports”) prepared by American Appraisal, an

independent valuer to the Group engaged by the Company; (v) the traffic volume, toll revenue and

operation and maintenance costs forecast studies in respect of Ningchang Zhenli and Xiyi Company

(the “Ningchang Zhenli Traffic Report” and the “Xiyi Company Traffic Report” respectively

and, collectively the “Traffic Reports”) prepared by Jiangsu Weixin Engineering Consultants Ltd.

(“Jiangsu Weixin”), an independent traffic consultant to the Group; (vi) the legal opinion (the “PRC

Legal Opinion”) prepared by C&T Partners, an independent legal adviser as to PRC laws to the

Group; (vii) the Company’s annual report for the year ended 31 December 2013 (the “2013 Annual

Report”), the interim report for the six months ended 30 June 2014 (the “2014 Interim Report”) and

the third quarterly reports for the three months ended 30 September 2013 and 2014 (the “2013 Third

Quarterly Report” and “2014 Third Quarterly Report” respectively). At the same time, we have

also made reference to (i) the valuation reports in respect of Ningchang Zhenli and Xiyi Company

(the “Ningchang Zhenli State-owned Assets Valuation Report” and the “Xiyi Company State-

— 54 —


owned Assets Valuation Report” respectively and, collectively, the “State-owned Assets Valuation

Reports”) prepared by Orient Appraisal, a qualified state-owned assets valuer in the PRC, engaged by

Communications Holdings; and (ii) the accountants’ reports of Ningchang Zhenli and Xiyi Company

for the three years ended 31 December 2013 and nine months ended 30 September 2014 respectively

and, collecively (the “Accountants’ Reports”) issued by Deloitte Touche Tohmatsu Certified Public

Accountants LLP, a licensed corporation to carry out equity and futures activities. In addition, we have

discussed with the management of the Company on the background, reasons and benefits for entering

into the Ningchang Zhenli Equity Transfer Agreement, the Debt Transfer Agreement, the Profit

Compensation Agreement, the Xiyi Company Equity Transfer Agreement and the Absorption and

Merger Agreement. Moreover, we have interviewed and discussed with each of American Appraisal,

Jiangsu Weixin, Orient Appraisal and Deloitte Touche Tohmatsu Certified Public Accountants LLP

regarding the basis of preparation of the AA Valuation Reports, the Traffic Reports, the State-owned

Assets Valuation Reports and Accountants’ Reports, respectively.

We have no reason to doubt the truth, accuracy and completeness of the statements, information,

opinions and representations provided to us by the Group, the Directors, the management staff of

the Group and their respective advisers or to believe that material information has been withheld or

omitted from the information provided to us or referred to in the aforesaid documents. We consider

that we have reviewed sufficient relevant information and documents which are currently available

to enable us to reach an informed view and to justify our reliance on the information provided

so as to provide a reasonable basis for our recommendations. We have not, however, carried out

any independent verification of the information provided, nor have we conducted an independent

investigation into the business affairs, operations, financial position or future prospect of the Group,

Ningchang Zhenli, Xiyi Company and/or their respective subsidiaries, associated companies and

shareholders.

Our recommendations contained herein are made based on the financial, economic, market, regulatory

and other conditions in effect, and the facts, information, opinions and representations made available

to us as at the Latest Practicable Date. Shareholders should note that subsequent developments

(including any material change in market and economic conditions) may affect and/or change our

recommendations and we do not have any obligation to update, revise or reaffirm our recommendations

to take into account events occurring after the Latest Practicable Date.

— 55 —


PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our recommendations, we have taken the following principal factors and reasons into

consideration:

1 Information of the Group, the Company and Guangjing Xicheng

1.1 The Group

As set out in the Letter from the Board, the Group is principally engaged in the

investment, construction, operation and management of toll roads and bridges within

Jiangsu Province and the development and operation of ancillary service areas along such

toll roads and bridges. According to the 2013 Annual Report, the major toll roads of the

Group include the Jiangsu section of Shanghai-Nanjing Expressway (“Shanghai-Nanjing

Expressway”), the Nanjing-Shanghai section of G312 (“312 National Highway”), the

Nanjing section of Nanjing-Lianyungang Highway (“Nanjing-Lianyungang Highway”)

and the north connection of Jiangyin Yangtze Bridge, Guangling-Jingjiang Section

(the “Guangjing Expressway”) and the south connection of Jiangyin Yangtze Bridge,

Jiangyin-Wuxi Section (the “Xicheng Expressway” and, together with the Guangjing

Expressway, the “Guangjing Xicheng Expressway”). The highway mileage owned or

managed through investment by the Company exceeded 850km as at 31 December 2013.

Set out below is the summary of the Group’s operating income and consolidated income

statements for the two years ended 31 December 2013 and the nine months ended 30

September 2013 and 2014 respectively:

For the year ended 31 December For the nine months ended 30 September

2012 2013 2013 2014

RMB’000 % RMB’000 % RMB’000 % RMB’000 %

(unaudited) (unaudited)

Toll road operation 5,092,022 65.3% 5,344,929 70.2% 3,978,340 70.5% 4,046,113 67.7%

Ancillary business 2,357,432 30.2% 2,150,139 28.2% 1,588,626 28.2% 1,691,895 28.3%

Property sales,

advertising and others 346,489 4.5% 119,159 1.6% 75,284 1.3% 238,086 4.0%

Total 7,795,943 100.0% 7,614,227 100.0% 5,642,250 100.0% 5,976,094 100.0%

Source: The 2013 Annual Report, the 2013 Third Quarterly Report and the 2014 Third Quarterly Report

— 56 —


For the year ended

31 December

For the nine months ended

30 September

2012 2013 2013 2014

RMB’000 RMB’000 RMB’000 RMB’000


Total operating income 7,795,943 7,614,227 5,642,250 5,976,094

Net profit 2,381,236 2,775,627 2,212,764 2,131,027

Net profit attributable

to owners of

the parent company 2,333,345 2,707,743 2,155,589 2,068,217

Source: The 2013 Annual Report and the 2014 Third Quarterly Report

Set out below is the summary of the Group’s consolidated balance sheet as at 31

December 2012, 31 December 2013 and 30 September 2014 respectively:

As at 31 December

As at

30 September

2012 2013 2014

RMB’000 RMB’000 RMB’000

(unaudited)

Cash and bank balances 686,485 409,177 563,198

Current assets 4,239,711 4,753,929 5,442,048

Total assets 25,849,258 26,833,912 27,229,982

Current liabilities 5,743,940 5,472,093 6,208,956

Total liabilities 6,693,782 6,735,685 6,975,352

Net assets 19,155,476 20,098,228 20,254,630

Gearing ratio (%) 25.9% 25.1% 25.6%

Source: The 2013 Annual Report and the 2014 Third Quarterly Report

— 57 —


The revenue from the toll roads operation was the main source of the Group’s operating

income. As set out in the above tables, the revenue from the toll roads operation for the

nine months ended 30 September 2014 represented approximately 67.7% of the Group’s

operating income. In addition, for the nine months ended 30 September 2014, the

Group’s gearing ratio calculated by dividing total liabilities by total assets (the “gearing

ratio”) was approximately 25.6% as at 30 September 2014. According to the 2014 Third

Quarterly Report, the cash and bank balances of the Group increased to approximately

RMB563 million as at 30 September 2014 from approximately RMB409 million as at 31

December 2013.

1.2 The Company

The Company is a joint-stock limited company incorporated in the PRC, whose H shares

are listed on the Hong Kong Stock Exchange. As set out in the Letter from the Board,

the Company is principally engaged in the investment, construction, operation and

management of toll roads and bridges within Jiangsu Province and the development and

operation of ancillary service areas along such toll roads and bridges.

Set out below is the summary of the Company’s income statements for the two years

ended 31 December 2013 and the nine months ended 30 September 2013 and 2014

respectively:

For the year ended

31 December


30 September

2012 2013 2013 2014

RMB’000 RMB’000 RMB’000 RMB’000


Total operating income 6,739,409 6,737,273 5,005,876 5,125,719

Net profit 2,270,740 2,408,327 1,935,506 2,011,350

Source: The 2013 Annual Report and the 2014 Third Quarterly Report of the Group

— 58 —


Set out below is the summary of the Company’s balance sheet as at 31 December 2012,

31 December 2013 and 30 September 2014 respectively:

As at 31 December

As at

30 September

2012 2013 2014

RMB’000 RMB’000 RMB’000

(unaudited)


Current assets 3,117,961 1,527,149 2,110,077

Total assets 23,651,449 24,228,197 24,464,676



Net assets 18,049,935 18,659,126 18,741,821

Gearing ratio (%) 23.7% 23.0% 23.4%

Source: The 2013 Annual Report and the 2014 Third Quarterly Report of the Group

As illustrated in the above table, for the nine months ended 30 September 2014, the

operating income of the Company was approximately RMB5,126 million and its net

profit was approximately RMB2,011 million, representing a slight growth of 2.4% and

3.9% compared with that of the same period in 2013, respectively. In addition, as at

30 September 2014, the total assets and net assets of the Company were approximately

RMB24,465 million and RMB18,742 million respectively, and its gearing ratio was

approximately 23.4%.

According to the Jiangsu Expressway Company Limited Credit Rating Report 2014 (2014

年度江蘇寧滬高速公路股份有限公司信用評級報告) dated 6 November 2014 issued

by China Chengxin International Credit Rating Co., Ltd (“CCXI”), established with the

approval of the People’s Bank of China and the Ministry of Commerce of the PRC and

being a member of Moody’s Investors Service, Inc., an international rating institution,

the Company has been granted an AAA corporate credit rating for 2014. For the two

years ended 31 December 2013, the effective interest rates for the Company’s borrowings

were approximately 5.3% and 5.2% respectively. As at 30 November 2014, the banking

facilities available to the Company amounted to approximately RMB6,000 million, of

which approximately RMB1,366 million has been utilised and approximately RMB4,634

million has not yet been utilised.

— 59 —


1.3 Guangjing Xicheng

Guangjing Xicheng is a 85%-owned subsidiary of the Company and is principally

engaged in the operation and management of the Guangjing Expressway and Xicheng

Expressway with a total length of approximately 52.2 km. According to the audit report

of Guangjing Xicheng for the year ended 31 December 2013, its operating income and net

profit for the year ended 31 December 2013 amounted to approximately RMB762 million

and RMB450 million respectively. According to the unaudited management account

of Guangjing Xicheng, as at 30 September 2014, the total assets (including cash and

bank balances of approximately RMB161 million) and net assets of Guangjing Xicheng

amounted to approximately RMB3,971 million and RMB3,476 million respectively, and

its gearing ratio was approximately 12.5%.

As at 30 November 2014, banking facilities available to Guangjing Xicheng amounted to

RMB960 million, of which RMB100 million has been utilised and RMB860 million has

not yet been utilised.

Set out below is the summary of Guangjing Xicheng’s consolidated income statements for

the two years ended 31 December 2013 and the nine months ended 30 September 2013

and 2014 respectively:

For the year ended

31 December


30 September

2012 2013 2013 2014

RMB’000 RMB’000 RMB’000 RMB’000


Operating revenue 712,906 762,416 563,825 615,069

Total profit 409,165 552,223 458,596 518,467

Net profit 314,190 450,092 376,091 418,736

Source: Guangjing Xicheng’s audit report for 2013 and the unaudited management account of Guangjing Xicheng for the nine months ended 30 September 2014

— 60 —


2 Information of Ningchang Zhenli and Xiyi Company

For the Ningchang Zhenli Transaction, the Company intends to acquire 100% equity interest in

Ningchang Zhenli and, at the same time, carry out debt restructuring in respect of Ningchang

Zhenli through debt transfer to the Company for tax optimisation. For the Xiyi Company

Transaction, the Company intends to acquire 100% equity interest in Xiyi Company and, at

the same time, absorb and merge Xiyi Company with Guangjing Xicheng for operation and

management optimization and enhancement in economies of scale.

2.1 Ningchang Zhenli

2.1.1 Background

According to the business license of Ningchang Zhenli, Ningchang Zhenli was

established as a limited liability company in the PRC and its approved business

scopes include (to be operated by branch organizations as regulated by the

respective business licenses) car maintenance and repair, catering service, sales of

food and beverage, cigarettes (cigar), sales of refined oil products, accommodation,

sales of publications and its general business scope include highway construction,

management, repair and related technical consultation, toll for traffic access, sales

of goods, textile products, daily commodities, hardware, electrical equipment,

chemicals and water product, design of, production of, agent for and outdoor

distribution of advertisements, prints and gift advertisements

— 61 —


As set out in the Letter from the Board, Ningchang Zhenli is principally engaged

in the operation, maintenance and management of Ningchang Expressway and

Zhenli Expressway. Its operating revenue is mainly derived from its toll income.

According to the Ningchang Zhenli Traffic Report, both Ningchang Expressway

and Zhenli Expressway are located in Jiangsu Province. Ningchang Expressway

is one of the sections to the major expressways under the Jiangsu Province

Expressway Network Plan (the “Jiangsu Province Expressway Network Plan”)

issued by the Jiangsu Development and Reform Commission and the Jiangsu

Transport Department in 2006. To the west, Ningchang Expressway connects to the

Nanjing section of Lishui-Ma’anshan Expressway (the “Lima Expressway”) and,

to the east, it connects to the Changzhou-Jiangyin section of the Nanjing-Taicang

Expressway and to the Shanghai-Nanjing Southern Passageway which are under

planning. Zhenli Expressway is part of the key expressways under the Jiangsu

Province Expressway Network Plan, and, starting from the southern terminal of

Runyang Yangtze River Road Bridge, Zhenli Expressway connects to Ninghang

Expressway and Liyang-Guangde Expressway, which is under planning, in the

south. The geographical diagram for the major road assets of Ningchang Zhenli has

been set out in the Letter from the Board.

The table below set out the basic information of Ningchang Expressway and Zhenli

Expressway according to the Ningchang Zhenli Traffic Report:

Name of

expressway No. of lanes Mileage

Status of

expressway

Start of

concession

period

End of

concession

period

km

Ningchang

Expressway

6 lanes in the

entire expressway 87.26

Open to

traffic

September

2007

September

2032

Zhenli

Expressway

6 lanes in the

entire expressway 65.66

Open to

traffic

September

2007

September

2032

Total: 152.92

— 62 —


2.1.2 Financial Information

The table below sets out the summary of the audited consolidated financial

information of Ningchang Zhenli for the years ended 31 December 2012 and 2013

and the nine months ended 30 September 2013 and 2014 respectively, which is

extracted from the “Accountants’ Report on Ningchang Zhenli” set out in Appendix

IIA to the Circular :

For the year ended

31 December

For the nine

months ended

30 September

2012 2013 2013 2014

RMB’000 RMB’000 RMB’000 RMB’000

(unaudited)

Operating income 422,898 456,140 329,673 491,652

Gross profit 46,528 36,011 44,074 124,432

Finance expenses 488,511 467,440 346,666 354,500

Profit before finance costs

and taxation 21,880 17,445 34,528 113,876

Loss before taxation –466,631 –449,995 –312,138 –240,624

Net loss –466,631 –449,995 –312,138 –240,624

As at 31 December

As at

30 September

2012 2013 2014

RMB’000 RMB’000 RMB’000


Current assets 120,857 103,148 127,827

Total assets 8,155,638 7,888,041 7,684,028



Net assets 901,122 451,127 210,503

Gearing ratio (%) 89.0% 94.3% 97.3%

— 63 —


As shown in the table above, the operating income of Ningchang Zhenli increased

from approximately RMB423 million for the year ended 31 December 2012 to

approximately RMB456 million for the year ended 31 December 2013, representing

a year-on-year growth of 7.9%. Its operating income for the nine months ended 30

September 2014 was approximately RMB492 million, representing an increase of

approximately 49.1% as compared with the corresponding period in last year. Such

increase was mainly due to the rapid traffic growth of Ningchang Expressway as a

result of the opening of the entire expressway from Changshu to Hefei in December

2013.

Although the operating revenue of Ningchang Zhenli recorded a year-on-year

growth both for the year ended 31 December 2013 and for the nine months ended

30 September 2014, Ningchang Zhenli recorded net losses of approximately

RMB467 million and RMB450 million in 2012 and 2013 respectively, and net

losses of approximately RMB312 million and RMB241 million for the nine

months ended 30 September 2013 and 2014 respectively. Such net losses were

mainly attributable to its finance costs of approximately RMB489 million and

RMB467 million in 2012 and 2013 respectively, and approximately RMB347

million and RMB355 million for the nine months ended 30 September 2013 and

2014 respectively. Such finance costs mainly consisted of interest expenses for

its borrowings. The borrowings of Ningchang Zhenli amounted to approximately

RMB7,099 million, RMB7,308 million and RMB7,296 million as at 31 December

2012 and 2013 and as at 30 September 2014 respectively, and the effective interest

rates of the borrowings for the corresponding year/period were approximately 6.9%,

6.4% and 6.4% respectively. In addition, the gearing ratio of Ningchang Zhenli was

approximately 97.3% as at 30 September 2014. It is noted that if such finance costs

were to be excluded, Ningchang Zhenli would have recorded profits before finance

costs and taxation of approximately RMB22 million and RMB17 million for 2012

and 2013, and approximately RMB35 million and RMB114 million for the nine

months ended 30 September 2013 and 2014 respectively.

For the detailed information and analysis of Ningchang Zhenli, please refer to the

section headed “Management Discussion and Analysis of Ningchang Zhenli” set

out in Appendix IIIA to the Circular.

— 64 —


2.1.3 Interest-bearing Borrowings

As stated in the Letter from the Board, the Company would carry out debt

restructuring in respect of Ningchang Zhenli through entering into the Debt Transfer

Agreement with Ningchang Zhenli on 30 December 2014 for the assignment of all

Ningchang Zhenli’s interest-bearing borrowings as at the completion date of the

Ningchang Zhenli Equity Transfer Agreement, not more than RMB7,500,000,000

(equivalent to approximately HKD9,500,000,000), to the Company. Following the

assignment of all Ningchang Zhenli’s interest-bearing borrowings, the Company

shall capitalise such debts into equity in accordance with the applicable laws.

As at 30 September 2014, the principal amount of all interest-bearing borrowings

of Ningchang Zhenli was RMB7,295,500,000. Ningchang Zhenli has obtained

letters of consent in respect of the assignment of its interest-bearing borrowings to

the Company from all the corresponding creditors. Details of the interest-bearing

borrowings are set out in the Letter from the Board.

2.2 Xiyi Company

2.2.1 Background

According to the business license of Xiyi Company, Xiyi Company is a company

incorporated in the PRC with limited liability and its approved business scope

includes (limited to the operation of branch organizations) transport of passengers

and goods, warehousing; sales of petroleum products; car maintenance;

accommodation, catering service; sales of non-staple and other food; sales of

tobacco; sales and renting of publications; and its general business scope includes

construction, maintenance and management of Xiyi Expressway, collection of

toll for traffic access; (limited to operation by branch organizations) design of,

production of, agent for and distribution of national advertisements; sales of textile

products, daily commodities (excluding explosives), hardware, electrical equipment,

chemicals (excluding hazardous products) and car spare parts; sales of goods;

provision of enterprise management service.

— 65 —


As stated in the Letter from the Board, Xiyi Company is principally engaged in the

operation, maintenance and management of Xiyi Expressway, Luma Highway and

Wuxi Huantaihu Expressway. According to the Xiyi Company Traffic Report, Xiyi

Expressway, Luma Highway and Wuxi Huantaihu Expressway are all located in

Jiangsu Province. Xiyi Expressway starts from northern Wuxi in connection with

Shanghai-Nanjing Expressway, and ends at Yixing West Docking in connection

with Nanjing-Hangzhou Expressway. Luma Highway is a Class 1 highway

connecting Xiyi Expressway and Wuxi (Mashan) Tourist Resort (無錫馬山旅遊度假區). Wuxi Huantaihu Expressway starts from Wuxi Xifang in connection with

Shanghai-Nanjing Expressway, going across Beijing-Shanghai High Speed Railway,

Beijing-Hangzhou Grand Canal and 312 National Highway in the south, and passes

Xin’an, Huazhuang and Nanquan. The geographical diagram for the major road

assets of Xiyi Company has been set out in the Letter from the Board.

The table below sets out the basic information of Xiyi Expressway, Luma Highway

and Wuxi Huantaihu Expressway according to the Xiyi Company Traffic Report:

Name of

expressway No. of lanes Mileage

Status of

expressway

Start of

concession

period

End of

concession

period

Km

Xiyi

Expressway

4 lanes in the

entire expressway

69.3 Open to

traffic

September

2003

September

2028

Luma Highway 4 lanes in the

entire expressway

10.0 Open to

traffic

January

2005

September

2028

Wuxi Huantaihu

Expressway

6 lanes in the

entire expressway

20.0 Open to

traffic

October

2006

October

2031

Total: 99.3

— 66 —


2.2.2 Financial Information

The table below sets out the summary of the audited consolidated financial

information of Xiyi Company for the years ended 31 December 2012 and 2013

and the nine months ended 30 September 2013 and 2014 respectively, which is

extracted from the “Accountants’ Report on Xiyi Company” set out in Appendix

IIB to the Circular:

For the year ended

31 December

For the nine

months ended

30 September

2012 2013 2013 2014

RMB’000 RMB’000 RMB’000 RMB’000

(unaudited)

Operating income 252,145 262,743 194,668 207,628

Gross profit 118,050 104,660 87,471 89,393

Finance costs 124,954 119,576 88,516 83,249

Profit before finance costs

and taxation 103,736 91,573 78,124 79,838

Loss before taxation –21,218 –28,002 –10,392 –3,411

Net loss –21,232 –28,003 –10,392 –3,411

As at 31 December

As at

30 September

2012 2013 2014

RMB’000 RMB’000 RMB’000


Current assets 73,311 29,284 50,923

Total assets 2,611,352 2,507,637 2,467,210

Current liabilities 903,571 982,859 695,843


Net assets 690,781 662,778 659,367

Gearing ratio (%) 73.5% 73.6% 73.3%

— 67 —


As shown in the table above, the operating revenue of Xiyi Company increased

from approximately RMB252 million in 2012 to approximately RMB263 million

in 2013, representing a year-on-year growth of approximately 4.2%, while the

operating revenue of Xiyi Company amounted to approximately RMB208 million

for the nine months ended 30 September 2014, representing an increase of

approximately 6.7% as compared to the corresponding period in previous year.

Although the operating revenue of Xiyi Company recorded a year-on-year growth

both for the year ended 31 December 2013 and the nine months ended 30 September

2014, it recorded net losses of approximately RMB21 million and RMB28 million

for the years ended 31 December 2012 and 2013 respectively and approximately

RMB10 million and RMB3 million for the nine months ended 30 September 2013

and 2014 respectively. Such net losses were mainly attributed to the financial

costs of approximately RMB125 million, RMB120 million, RMB89 million and

RMB83 million for the years ended 31 December 2012 and 2013 and the nine

months ended 30 September 2013 and 2014 respectively. Following the gradual

decrease in financial costs, the net loss of Xiyi Company was reduced for the nine

months ended 30 September 2014. As at 30 September 2014, the gearing ratio of

Xiyi Company was approximately 73.3%.

Guangjing Xicheng shall absorb and merge with Xiyi Company when the former

acquired the entire equity interest of Xiyi Company. As a result, all the borrowings

of Xiyi Company will be consolidated into Guangjing Xicheng.

For the detailed information and analysis of Xiyi Company, please refer to the

section headed “Management Discussion and Analysis of Xiyi Company” in

Appendix IIIB to the Circular.

— 68 —


3 Reasons for and benefits of the Ningchang Zhenli Transaction and the Xiyi Company

Transaction

3.1 Prospects for the Jiangsu Province economy and transportation industry in Jiangsu

Province are expected to remain positive

According to the Traffic Reports, transport demand is closely related to the development

of the economy of a region, as exhibited by the growth in its gross domestic product

(“GDP”). The table below sets out the nominal and the year-on-year real GDP growth

rates of Jiangsu Province for the five years ended 31 December 2013.

Nominal GDP Real GDP year-on-year growth rate (%)

Year

Jiangsu

Province The PRC

Percentage

of Jiangsu

Province

in the PRC

Jiangsu

Province The PRC

Jiangsu

Province

vs the PRC

RMB hundred

million

RMB hundred

million % % % %

2009 34,457.3 340,902.8 10.1 12.4 9.2 +3.2

2010 41,425.5 401,512.8 10.3 12.7 10.4 +2.3

2011 49,110.3 473,104.1 10.4 11.0 9.3 +1.7

2012 54,058.2 519,470.1 10.4 10.1 7.7 +2.4

2013 59,161.8 568,845.2 10.4 9.6 7.7 +1.9

Source: National Bureau of Statistics of China and Jiangsu Provincial Bureau of Statistics

According to the Jiangsu Provincial Bureau of Statistics, Jiangsu Province remained the

second largest PRC province in terms of regional GDP, accounting for more than 10%

of the total nominal GDP of the PRC for each of the five years ended 31 December

2013. As shown in the table above, the year-on-year growth rates of real GDP of Jiangsu

Province were higher than that of the PRC for each of the five years ended 31 December

2013. Furthermore, according to the Traffic Reports, with reference to the forecast on the

future economic growth of Jiangsu made by Information Center of Jiangsu Province (江蘇省資訊中心), the year-on-year growth rates of real GDP in all the five major cities

of Southern Jiangsu (the “Five Major Cities of Southern Jiangsu”), namely Nanjing,

Wuxi, Changzhou, Suzhou and Zhenjiang, are expected to range between 7.5% and 11.0%

from 2014 to 2020.

— 69 —


All the toll roads operated by Ningchang Zhenli and Xiyi Company are located in

southern Jiangsu. According to the Plan for Southern Jiangsu Modernization Construction

Demonstration Area (“the Plan for Southern Jiangsu Modernization Construction

Demonstration Area”) (蘇南現代化建設示範區規劃) published by the National

Development and Reform Commission in 2013, southern Jiangsu is one of the areas with

the most developed economy and highest level of modernization in China. The National

Development and Reform Commission prepared the Plan for South Jiangsu Modernization

Construction Demonstration Area so as to promote southern Jiangsu to take the lead in

realising modernization and act as a pioneer in the national modernization construction.

Therefore, the Directors believe that southern Jiangsu will embrace a new development

opportunity, from which the toll roads operated by Ningchang Zhenli and Xiyi Company

will benefit as well.

According to the National Economic and Social Development Statistical Communique

of Jiangsu Province for 2013 (2013年江蘇省國民經濟和社會發展統計公報), as at 31

December 2013, vehicle ownership for civilian use totaled 9,544,000, which represented

an increase of 17.4% over the previous year, and of which 7,901,000 was attributable to

private car ownership, representing an increase of 20.2% over the previous year. In 2013,

the transportation industry of Jiangsu Province basically remained stable as the passenger

and cargo transportation volumes rose by 4.0% and 8.8% year-on-year respectively. In

particular, the passenger and cargo transportation volumes by way of road transportation

rose by approximately 3.5% and 9.7% year-on-year, respectively. According to the Traffic

Reports, it is anticipated that growth rates of passenger and cargo transportation volumes

in the Five Major Cities of Southern Jiangsu would range from 4.3% to 5.6% and from

3.6% to 4.8% respectively between 2014 and 2020.

We note that the local government in Jiangsu Province has implemented policies, such

as a toll-free policy for small passenger vehicles during major festivals and holidays

and a policy which restricted non-local passenger and trucks from using the ring road

of Nanjing, which are unfavorable to the toll highways and bridges industry. As advised

by Jiangsu Weixin, such unfavourable policies to the toll highways and bridges industry

have already been taken into consideration during the preparation of the Traffic Reports

regarding the forecast on the transportation volumes and toll revenue of Ningchang

Zhenli and Xiyi Company. After taking various factors (including, but not limited to,

the economic development of the region) into consideration, Jiangsu Weixin anticipate

that the toll highways and bridges industry of Jiangsu Province will be able to maintain

growth from 2014 to 2020, and the transportation volumes and toll revenue of the toll

highways and bridges operated by Ningchang Zhenli and Xiyi Company will record

positive growth.

— 70 —


Having considered (i) the historical trend of the steady growth in the nominal GDP

of Jiangsu Province; (ii) the historical trend of higher year-on-year growth rates of

the real GDP of Jiangsu Province than that of the PRC; (iii) the Plan for Southern

Jiangsu Modernization Construction Demonstration Area is beneficial to the long-

term development of southern Jiangsu; (iv) the trend of steady development in the

transportation industry, in particular the road transportation industry, of Jiangsu Province

in terms of passenger and cargo transportation volumes and vehicle ownership; and (v)

the positive forecast for the macro-economic environment (in terms of real GDP growth

rates) and the toll road industry development (in terms of transportation volumes) in the

Five Major Cities of Southern Jiangsu according to the Traffic Reports, we consider that

the overall trend of economic and highway industry development in Jiangsu Province

would remain positive in the foreseeable future.

3.2 The Ningchang Zhenli Transaction and the Xiyi Company Transaction are in line with

the principal businesses and strategic business development of the Group

As mentioned above, the Group, Ningchang Zhenli and Xiyi Company are mainly engaged

in the operation and management of toll roads and bridges within Jiangsu Province, and

the operation of ancillary service areas along such toll roads and bridges. According to

the 2013 Annual Report and the 2014 Interim Report, one of the Group’s key measures

for future strategic development is continuing to pay close attention to and consider

investment opportunities in relation to expressway and other transport infrastructures.

Save for the Ningchang Zhenli Transaction and the Xiyi Company Transaction, the Group

also has new construction projects (including but not limited to the new Changshu-Jiaxing

Expressway and Zhenjiang-Danyang Expressway construction projects), to further expand

its business and strengthen its position in the market of Jiangsu province. Therefore,

we concur with the Directors’ opinion that the Ningchang Zhenli Transaction and the

Xiyi Company Transaction are in line with the Group’s principal business and strategic

business development.

— 71 —


3.3 Expansion of expressway network will contribute to the strengthening of the Group’s

market position in the toll roads and bridges industry of Jiangsu Province

According to the 2014 Interim Report, the average daily traffic volume of Shanghai-

Nanjing Expressway, one of the major expressways operated by the Group, recorded a

year-on-year growth rate of approximately 4.0% for the first half of 2014, representing

a slower pace of growth than that of approximately 8.2% recorded for the first half of

2013. As stated in the Letter from the Board, the Directors is of the view that the opening

of Lima Expressway at the end of 2013, which gradually diverted trucks in the areas

along Anhui to southern Jiangsu from west section of Shanghai-Nanjing Expressway to

Ningchang Expressway operated by Ningchang Zhenli, led to growth in the traffic flow

of Ningchang Expressway and year-on-year reduction of truck flow of the west section

of Shanghai-Nanjing Expressway. According to the 2014 Third Quarterly Report, the

revenue from the Group’s toll business for the three months ended 30 September 2014

amounted to approximately RMB1,403 million, representing a year-on-year decrease

of approximately 1.1%. On the other hand, according to the Ningchang Zhenli Traffic

Report, it is anticipated that Ningchang Expressway will benefit from the positive impact

brought by the opening of Lima Expressway at the end of 2013, and the growth rates of

its traffic flow and revenue in 2014 are expected to be approximately 65.6% and 85.9%

respectively. Therefore, the Directors believe that by acquiring the entire equity interest

of Ningchang Zhenli by the Company, it will help compensate the Group for the loss of

traffic flow of west section of Shanghai-Nanjing Expressway due to the diversion.

Besides, as illustrated in the geographical diagrams in the Letter of the Board, the toll

roads operated by Ningchang Zhenli and Xiyi Company are all connected with the

expressway network operated by the Group. Save for Ningchang Expressway which is

parallel to the west section of Shanghai-Nanjing Expressway of the Group, the toll roads

and bridges operated and managed by Ningchang Zhenli and/or Xiyi Company can extend

the Group’s expressway network to areas in the southern part of Jiangsu Province which

are not covered by the existing expressway network of the Group. Besides, such toll roads

and bridges will connect the Group’s existing expressway network with other major roads

and bridges, such as Lima Expressway and Nanjing-Hangzhou Expressway. Therefore,

the Directors believe that the Ningchang Zhenli Transaction and the Xiyi Company

Transaction will assist the Company in expanding its principal business in toll roads and

bridges and increase its road passageways along the Yangtze Riverside in the southern

part of Jiangsu Province and along Shanghai-Nanjing area.

— 72 —


The Ningchang Zhenli Transaction and the Xiyi Company Transactions can also increase

the road mileage operated and managed by the Group. According to the 2013 Annual

Report, as at the end of 2013, the road mileage owned or invested by the Group exceeded

850km. As at the Latest Practicable Date, the mileage of the toll roads operated and

managed by Ningchang Zhenli and Xiyi Company amounted to approximately 152.9km

and 99.3km respectively, and approximately 252.2km in total. Therefore, the acquisition

of Ningchang Zhenli and/or Xiyi Company could increase the scale of operation of the

Company.

Having considered that (i) the Ningchang Zhenli Transaction will help compensate the

loss of traffic flow of west section of Shanghai-Nanjing Expressway due to the diversion

of traffic flow to Lima Expressway; and (ii) the Ningchang Zhenli Transaction and the

Xiyi Company Transaction will extend the expressway network of the Company and

connect the Group’s existing expressway network with other major roads and bridges,

we concur with the Directors that the Ningchang Zhenli Transaction and the Xiyi

Company Transaction would help the Group to deepen the development strategy of the

principal business of the Company and strengthen the Company’s market position in the

expressway network of southern Jiangsu area.

3.4 The toll roads and bridges operated by Ningchang Zhenli and Xiyi Company are

expected to maintain their operational and financial growth

As stated in the Letter from the Board, the table below sets out the year-on-year growth

rates of the average daily traffic volumes and toll revenue of the toll roads managed by

Ningchang Zhenli and Xiyi Company:

Year-on-year growth rate of

average daily traffic volume

Year-on-year growth rate of

average daily toll revenue

Owner of the operation

right of expressway Expressway

For the

year ended

31 December

2013

For the nine

months ended

30 September

2014

For the

year ended

31 December

2013

For the nine

months ended

30 September

2014

Ningchang Zhenli Ningchang Expressway 9.29% 57.51% 14.49% 73.11%

Zhenli Expressway 3.69% 10.28% 2.38% 8.32%

Xiyi Company Xiyi Expressway (including

Luma Highway)

8.61% 7.64% 4.35% 8.57%

Wuxi Huantaihu

Expressway

20.30% 19.47% 14.07% 22.67%

— 73 —


As shown in the table above, the average daily traffic volumes and toll revenue of the

toll roads operated by Ningchang Zhenli and Xiyi Company maintained positive year-on-

year growth rates for the year ended 31 December 2013 and the nine months ended 30

September 2014. According to the Traffic Reports, it is expected that, from 2014 to 2020,

the CAGR of the average daily traffic volume of Ningchang Expressway and Zhenli

Expressway shall be approximately 10.0% and 5.5%, respectively, and the CAGR of their

average daily toll revenue shall be approximately 8.9% and 4.7%, respectively. Besides,

it is expected that, from 2014 to 2020, the CAGR of the average daily traffic volume of

Xiyi Expressway (including Luma Highway) and Wuxi Huantaihu Expressway (including

Suxi Expressway) shall be approximately 8.0% and 11.7%, respectively, and the CAGR

of their average daily toll revenue shall be approximately 7.5% and 10.5%, respectively.

In addition, as stated in paragraph 2.1 above, for the year ended 31 December 2013,

although both Ningchang Zhenli and Xiyi Company recorded growth in operating

revenue, Ningchang Zhenli and Xiyi Company recorded net losses during the same

period. Having considered that both Ningchang Zhenli and Xiyi Company recorded

net profits before finance costs and taxation, the Directors are of the view that the

profitability of Ningchang Zhenli and Xiyi Company can be enhanced by utilising the

Group’s investment and financing ability upon the completion of the Ningchang Zhenli

Transaction and the Xiyi Company Transaction, which will benefit the business and

financial performance of the Group in the long term.

As described above, according to CCXI, the Company’s credit rating was AAA in 2014.

For the two years ended 31 December 2013, the effective interest rates of Company were

5.3% and 5.2% respectively. Considering (i) the credit rating of the Company; and (ii) the

fact that the Company has been listed on Shanghai Stock Exchange and Hong Kong Stock

Exchange and can better access to the financing platform, the Directors believe that the

Company will obtain financing at a lower cost which will generate financial synergy in

the long run.

Accordingly, we concur with the Directors’ view that the toll roads and bridges operated

by Ningchang Zhenli and Xiyi Company are expected to have growth in their operation

and financial performance in the near future.

— 74 —


3.5 It is expected that the Group would benefit from tax policy

According to the Debt Transfer Agreement, all Ningchang Zhenli’s interest-bearing

borrowings as at the completion date of the Ningchang Zhenli Equity Transfer Agreement

shall be assigned to the Company. Ningchang Zhenli has undertaken in the Debt Transfer

Agreement that it would conduct financing according to the principle of reasonableness

and appropriateness and shall ensure that the total amount of interest-bearing borrowings

shall not exceed RMB7,500,000,000 on or before the completion date of the Ningchang

Zhenli Equity Transfer Agreement.

After all Ningchang Zhenli’s interest-bearing borrowings assigning to the Company, the

Company will bear additional finance costs which can lead to a deduction in the income

tax payable by the Company. According to the profit forecast adopted in the Ningchang

Zhenli AA Valuation Report, Ningchang Zhenli shall start recording net profit before tax

from 2015 onwards should all the finance costs be borne by the Company following the

completion of the Debt Transfer Agreement. Thus, as stated in the Letter from the Board,

the Directors expect that it will be able to enjoy the relevant policy which stipulates that

any profits before tax can be used to recover the cumulative loss for the previous five

years before the payment of enterprise income tax, therefore enabling the exemption or

reduction in enterprise income tax of Ningchang Zhenli. Hence, the Group would benefit

from the tax policy as a result of the Debt Transfer Agreement.

3.6 The absorption and merger with Xiyi Company can help improve operation and

management efficiency and enhance the economies of scale

Upon the completion of the acquisition of the entire equity interest of of Xiyi Company

by Guangjing Xicheng, the assets and liabilities of Xiyi Company would be consolidated

into the Group’s financial statements regardless whether the acquisition would be

followed by the absorption and merger with Guangjing Xicheng. As stated in the Letter

from the Board, considering that the expressways under the management of Guangjing

Xicheng are relatively short, only of approximately 52.2 km in aggregate, and are close

to Guangjing Xicheng Expressways, the Directors are of the view that the operation and

management efficiency of Guangjing Xicheng and Xiyi Company can be improved and

their economies of scales can be enhanced by unifying the operation, maintenance and

management of assets including Xiyi Expressway upon the completion of the absorption

and merger with Xiyi Company as compared to Guangjing Xicheng only acquiring

the entire equity interest of Xiyi Company. Therefore, we concur with the Board that

acquiring Xiyi Company by merger and absorption is reasonable and in the interest of the

Company and the Shareholders as a whole.

— 75 —


3.7 Ningchang Zhenli Transaction and Xiyi Company Transaction are expected to bring

considerable returns to the Group

As set out in the Letter from the Board, after taking into consideration the forecast on

profits of Ningchang Zhenli and Xiyi Company by American Appraisal, the assignment

of Ningchang Zhenli’s interest-bearing borrowings to the Company and the expected

benefits from tax policy, it is expected that upon the completion of the Ningchang

Zhenli Transaction and Xiyi Company Transaction, the internal rate of return on each

of the Transactions will be over 10%. Therefore, we concur with the Directors that the

Transactions are in the interests of the Company and the Shareholders as a whole.

Having considered that (i) the economic and transportation industry development of Jiangsu

Province are expected to remain positive; (ii) the Ningchang Zhenli Transaction and the

Xiyi Company Transaction are in line with the principal businesses and strategic business

development of the Group; (iii) expansion of expressway network can help deepening the

development strategy of the Company’s principle businesses and help enhancing the Company’s

market position in the expressway network of southern Jiangsu area; (iv) the toll roads and

bridges operated by Ningchang Zhenli and Xiyi Company are expected to have operational and

financial growth in the foreseeable future; (v) it is expected that the Group can benefit from

tax policy, and (vi) Ningchang Zhenli Transaction and Xiyi Company Transaction are expected

to bring considerable returns to the Group, we concur with the Directors that the Ningchang

Zhenli Transaction and the Xiyi Company Transaction are reasonable and in the interest of the

Company and the Shareholders as a whole.

4 Basis of the consideration for the Ningchang Zhenli Equity Transfer Agreement and the

Xiyi Company Equity Transfer Agreement

As stated in the Letter from the Board, the Transactions involve the disposal of state-owned

assets and pursuant to the applicable PRC law, the consideration payable for the disposal

of State-owned assets has to be made with reference to valuation of assets to be transferred

as prepared by qualified valuer. Therefore, Communications Holdings has engaged Orient

Appraisal to prepare the State-owned Assets Valuation Reports in this regard. As stated in the

Letter from the Board, the considerations (collectively, the “Considerations”) in respect of the

acquisition of the entire equity interest in Ningchang Zhenli and the absorption of and merger

with Xiyi Company were RMB502,000,000 and RMB662,000,000 respectively. As stated in

the Letter from the Board, Communications Holdings’ original purchase cost of Ningchang

Zhenli and Xiyi Company were RMB3,328,850,000 and RMB646,170,000, respectively,

representing the initial investment costs of incorporating Ningchang Zhenli and Xiyi Company.

The Considerations however are determined based on the assessment of value of the equity

interest of Ningchang Zhenli and Xiyi Company by a qualified state-owned assets valuer in the

— 76 —


PRC instead of their respective original purchase costs. Hence, the original purchase cost of

Ningchang Zhenli by Communications Holdings is significantly different from the consideration,

which is considered reasonable.

The Company has also engaged American Appraisal to perform an independent valuation

on Ningchang Zhenli and Xiyi Company. According to the AA Valuation Reports as set out

in Appendices IVA and IVB to the Circular, the valuation of the entire equity interest of

Ningchang Zhenli and Xiyi Company was RMB522,000,000 and RMB669,000,000 respectively

as at 30 September 2014.

We noted that the valuations of the State-owned Assets Valuation Reports are similar to that of

the AA Valuation Reports, and the valuations of the entire equity interest of Ningchang Zhenli

and Xiyi Company prepared by American Appraisal represent approximately 4.0% and 1.1%

higher than that prepared by Orient Appraisal, respectively. Therefore, we concur with the

Directors that the Considerations determined by using the valuation of the State-owned Assets

Valuation Reports (representing a slight discount to the valuations by American Appraisal) are

more favorable to the Group.

We also noted that the major operation data used in the preparation of the State-owned Assets

Valuation Reports and the AA Valuation Reports, such as the forecast of traffic volume, toll

revenue and operation and maintenance costs, are all based on the Traffic Reports. In order to

assess whether the AA Valuation Reports could provide a valid benchmark for assessing the

fairness and reasonableness of the Considerations, we have reviewed the State-owned Assets

Valuation Reports, the AA Valuation Reports and the Traffic Reports and have interviewed and

discussed with each of Orient Appraisal, American Appraisal and Jiangsu Weixin regarding

the preparation basis of their respective reports. We have also obtained and reviewed copies of

the certificates of relevant qualifications of each of Orient Appraisal, American Appraisal and

Jiangsu Weixin. In particular, Mr. Kevin Leung, the vice president and director of American

Appraisal, is a fellow member of the Association of Chartered Certified Accountants and

charter holder of the Chartered Financial Analyst. Jiangsu Weixin has obtained the Certificate

of Project Consultation (First Class)（工程諮詢單位資格證書甲級）issued by the National

Development and Reform Commission. We have obtained and reviewed copies, amongst others,

of the respective certificates. Besides, we noted from our discussion that the American Appraisal

has experience in valuating road assets while Jiangsu Weixin has experience in performing

forecast studies on the traffic volume and the toll revenue of roads, and both of the American

Appraisal and Jiangsu Weixin have been appointed by companies listed on the Hong Kong

Stock Exchange for a similar scope of work before. As advised by American Appraisal and

Jiangsu Weixin, among other engagements, from 2012 to 2014, American Appraisal and Jiangsu

Weixin has completed 2 projects in valuating road assets and 5 projects in performing forecast

studies on the toll road business, respectively for the companies listed on the Hong Kong Stock

Exchange (including the Company).

— 77 —


4.1 Valuation Report

4.1.1 Valuation Methodology

We understand that American Appraisal has considered three different valuation

approaches, namely the market approach, cost approach and income approach.

American Appraisal considered that the market approach is inappropriate as each

toll road may be unique and may have different considerations on transaction price

which depends on many factors such as location, toll rate, traffic volume, stage

of operation and status of the toll road assets and, hence, they have not identified

any comparable market transactions to Ningchang Zhenli and/or Xiyi Company.

In addition, American Appraisal considers that the cost approach is generally not

considered applicable to the valuation of a going concern. Consequently, American

Appraisal has adopted income approach, also known as the discounted cash flow

method (the “DCF”), instead of the market approach and cost approach, in the AA

Valuation Reports.

According to the AA Valuation Reports, given that Ningchang Zhenli and Xiyi

Company were set up for such toll road projects, in order to exclude the distortion

resulting from the change in capital structure, American Appraisal has adopted the

Adjusted Present Value (the “APV”) under the DCF. Under the APV, an enterprise

or a project is valued by discounting the projected free cash flows at a rate of

return assuming all equity financing as the fundamental value (the “Fundamental

Value”). The Fundamental Value is then added by the present value of tax shield

effect and is deducted by all the outstanding debt to arrive at the equity interest.

We concur with American Appraisal that DCF and APV are fair and reasonable

valuation methods in valuing Ningchang Zhenli and Xiyi Company since (i) the

recurrent nature of the toll revenues of Ningchang Zhenli and Xiyi Company; and

(ii) we understand from American Appraisal and note from circulars of precedent

cases of comparable companies as published on the website of the Stock Exchange

for the past 36 months that APV or similar DCF are the most commonly used

valuation method in valuing toll road projects for listed companies in Hong Kong.

— 78 —


4.1.2 Discount rate

When applying APV to estimate the present value of Ningchang Zhenli and

Xiyi Company, an appropriate discount rate has to be determined in discounting

projected free cash flows. According to the AA Valuation Reports, the discount

rates adopted are based on the estimated weighted average cost of capital (the

“WACC”), which is equivalent to the unlevered cost of equity or the rate of return

assuming all-equity financing under to the APV. American Appraisal has adopted

the capital asset pricing model (the “CAPM”) to derive such rate of return of

Ningchang Zhenli and Xiyi Company. Under the CAPM, we note that American

Appraisal has taken into account a number of factors including, but not limited

to, (i) the risk free rate; (ii) market equity risk premium; (iii) beta of a number of

comparable companies; (iv) small company premium; and (v) company specific

risk. The comparable companies for the estimation of the beta are Hong Kong listed

companies which are engaged in operation of toll road(s) in the PRC. As such,

we are of the view that it is reasonable to derive the beta from such comparable

companies.

Furthermore, according to the AA Valuation Reports, in view of the fact that

Ningchang Zhenli and Xiyi Company are unlisted companies which are typically

of relatively low liquidity for their ownership interest as compared to listed

companies, American Appraisal has applied a discount rate of 5% for lack of

marketability based on their analysis and market average. We understand from

American Appraisal that such discount rate for lack of marketability is within the

market range.

To ascertain the reasonableness of the discount rates, we have, amongst others,

(i) obtained and reviewed the calculation work for the AA Valuation Reports

provided by American Appraisal; (ii) discussed with American Appraisal and

been confirmed that each of the parameters used for determining the discount

rates are in line with the industry practice and consistent with their experience in

other similar transactions; (iii) reviewed the comparable companies selected by the

American Appraisal for the estimation of the beta; and (iv) reviewed the valuation

reports contained in circulars of acquisition of toll roads transactions published on

the website of the Stock Exchange in the past 36 months. According to the work

above, we are not aware of any material matters which would cause us to believe

the discount rates to be unreasonable and unfair.

— 79 —


According to the AA Valuation Reports, the discount rates applied in the valuation

of Ningchang Zhenli and Xiyi Company are 9.5% and 10.0% respectively.

Shareholders should note that the discount rate is one of the key underlying

variables in the Valuation. For hypothetic illustration only, according to the AA

Valuation Reports, every 1% increase in the discount rate will lead to a change

of approximately RMB447,000,000 and RMB140,000,000 in the market value of

Ningchang Zhenli and Xiyi Company respectively. For further information on the

impact on the valuation by different discount rates, Shareholders can refer to the

section headed “Sensitivity Analysis” in the AA Valuation Reports as set out in

Appendix IVA and IVB to the Circular.

4.1.3 Forecast of financial information

We note that, during the preparation of the AA Valuation Reports, American

Appraisal has taken into consideration and relied on the forecast of the traffic

volume, toll revenue and operation and maintenance costs of Ningchang Zhenli

and that of Xiyi Company in the Traffic Reports and information provided by the

Company, Ningchang Zhenli and Xiyi Company. We note that American Appraisal

believes that the forecast and information provided to and relied by them are

reasonable. The details are set out below in the paragraph headed “4.2 Traffic

Report”.

American Appraisal confirmed that the AA Valuation Reports are based on

recognized valuation procedures and practices, and the underlying bases and

assumptions adopted in the AA Valuation Reports are commonly used in

valuing toll road projects and are fair and reasonable. Based on our review of

the AA Valuation Reports and our discussion with American Appraisal, we have

not identified any major factors which would cast doubt on the fairness and

reasonableness of the methodologies and bases adopted in arriving at the AA

Valuation Reports.

— 80 —


4.2 The Traffic Reports

As disclosed in the AA Valuation Reports, American Appraisal has relied on the Traffic

Reports to a great extent to forecast the traffic volume, the toll revenue and the operating

and maintenance costs of the toll roads operated by Ningchang Zhenli and Xiyi Company.

We have reviewed the Traffic Reports and have discussed with Jiangsu Weixin on the

methodologies, bases and assumptions in relation to the traffic volume, the toll revenue

and the operating and maintenance costs forecast studies prepared and adopted by Jiangsu

Weixin. We noted that in forecasting the traffic volume, the toll revenue and the operating

and maintenance costs of the toll roads operated by Ningchang Zhenli and Xiyi Company,

Jiangsu Weixin has, among other things, collected relevant economic and traffic data

and conducted route survey on the toll roads operated by Ningchang Zhenli and Xiyi

Company and the major highways nearby.

Jiangsu Weixin has confirmed that the underlying assumptions adopted in the Traffic

Reports are normally used and are fair and reasonable. Jiangsu Weixin has also confirmed

that the Traffic Reports are prepared under the conventional forecasting procedures which

are internationally recognized and similar procedures had been used previously for other

toll road traffic forecast studies in the PRC. Based on our review of the Traffic Reports

and our discussion with Jiangsu Weixin, we did not identify any major factors which

would cast doubt on the fairness and reasonableness of the methodologies adopted and the

bases used in the Traffic Reports. We are of the opinion that the Traffic Reports provide

a reasonable basis for American Appraisal to prepare the AA Valuation Reports.

5 Principal Terms of the Ningchang Zhenli Transaction

The Ningchang Zhenli Transaction consisted of the Ningchang Zhenli Equity Transfer

Agreement, the Debt Transfer Agreement and the Profit Compensation Agreement. The

Company has entered into the Ningchang Zhenli Equity Transfer Agreement and the Profit

Compensation Agreement with Communications Holdings and the Debt Transfer Agreement

with Ningchang Zhenli.

The principal terms of each of the Ningchang Zhenli Equity Transfer Agreement, the Debt

Transfer Agreement and the Profit Compensation Agreement of Ningchang Zhenli have been set

out in the Letter from the Board.

— 81 —


5.1 Ningchang Zhenli Equity Transfer Agreement

According to the Ningchang Zhenli Equity Transfer Agreement, the Company has

agreed to acquire the entire equity interest in Ningchang Zhenli held by Communications

Holdings at a consideration of RMB502,000,000 and the consideration shall be paid to

Communications Holdings by way of cash within 30 working days after the Ningchang

Zhenli Equity Transfer Agreement becomes unconditional.

The conditions precedent of the Ningchang Zhenli Equity Transfer Agreement include:

(i) the Ningchang Zhenli Equity Transfer Agreement and the Ningchang Zhenli

Transaction and transaction price contemplated thereunder having been approved

by the Shareholders in the general meeting of the Company;

(ii) the transactions contemplated under the Ningchang Zhenli Equity Transfer

Agreement having been approved or registered by the state-owned assets

management department; and

(iii) all conditions precedent under the Debt Transfer Agreement between the Company

and Ningchang Zhenli having been satisfied.

As confirmed by the Board, only condition precedent (ii) has been satisfied as at the

Latest Practicable Date.

5.2 Debt Transfer Agreement

According to the Debt Transfer Agreement, all of Ningchang Zhenli’s interest-bearing

borrowings as at the completion date of the Ningchang Zhenli Transaction shall be

assigned to the Company (not exceeding RMB7,500,000,000).

Upon the completion of Ningchang Zhenli Equity Transfer Agreement, the assets and

liabilities (including the interest-bearing borrowings under the Debt Transfer Agreement)

and profits and losses (including the finance costs) of Ningchang Zhenli would be

consolidated into the Group’s financial statements regardless of the completion of the

Debt Transfer Agreement. Upon the completion of the Debt Transfer Agreement, all

Ningchang Zhengli’s interest-bearing borrowings would be assigned from Ningchang

Zhenli, which would then be a wholly-owned subsidiary of the Group, to the Company

and any finance costs incurred from such interest-bearing borrowings would be borne by

the Company, which would also be consolidated into the Group’s financial statements.

— 82 —


As stated in paragraphs 3.4 and 3.5 above, having considered (i) the AAA corporate credit

rating of the Company for 2014 granted by CCXI; (ii) the fact that the effective interest

rates of the borrowings of the Company, of approximately 5.3% and 5.2% for the years

ended 31 December 2012 and 2013, were lower than that of Ningchang Zhenli, which

were approximately 6.9% and 6.4% for the corresponding periods, and (iii) the fact that

the Company is listed on Shanghai Stock Exchange and Hong Kong Stock Exchange and

can better access to the financing platform, we concur with the Directors’ view that the

Company may be able to obtain financing at a lower cost which will generate financial

synergy for the Group in the long run. In addition, since it is expected to benefit from tax

policy for the Group, we concur that the Debt Transfer Agreement will be in the interest

of the Company and the Shareholders as a whole.

The condition precedents of the Debt Transfer Agreement include:

(i) the Debt Transfer Agreement, the transfer of debts and the amount to be transferred

as contemplated under the Debt Transfer Agreement having been approved by the

Shareholders in the general meeting of the Company; and

(ii) all conditions precedent under the Ningchang Zhenli Equity Transfer Agreement

between the Company and Communications Holdings having been satisfied.

As confirmed by the Board, none of the conditions precedent has been satisfied as at the


— 83 —


5.3 Profit Compensation Agreement

As stated in the Letter from the Board, given that the consideration for the entire equity

interests of Ningchang Zhenli is based on income approach and exceeds its net book

value by over 100% and the Ningchang Zhenli Transaction is expected to be completed

in 2015, Communications Holdings is required to compensate to the Company for

the shortfall of the actual profit before tax and financial expenses after deducting

non-recurring gains and losses of Ningchang Zhenli from the same projected in the

Ningchang Zhenli State-owned Assets Valuation Report from 2015 to 2017 as required

by the Shanghai Stock Exchange. The profit before tax and financial expenses after

deducting non-recurring gains and losses of Ningchang Zhenli for the two years ended

31 December 2013 and the nine months ended 30 September 2014 were approximately

RMB23.8 million, RMB16.1 million and RMB113.4 million respectively. The Company

entered into the Profit Compensation Agreement with Communications Holdings on 30

December 2014, pursuant to which Communications Holdings guarantee that the profit

before tax and financial expenses after deducting non-recurring gains and losses of

Ningchang Zhenli would not be less than RMB230,434,300 in 2015, RMB269,083,700

in 2016 and RMB299,931,100 in 2017. Such guaranteed amounts are equivalent to the

projected profit before interest and tax after deducting non-recurring gains and losses set

out in the Ningchang Zhenli State-owned Assets Valuation Report.

The condition precedents of the Profit Compensation Agreement:

(i) all conditions precedent under the Profit Compensation Agreement on which the

transaction and the transaction price are based having been satisfied, which means

that the Ningchang Zhenli Equity Transfer Agreement between the Company and

Communications Holdings having taken effect and the Debt Transfer Agreement

between the Company and Ningchang Zhenli becomes unconditional; and

(ii) the relevant business registration in respect of the capitalisation of the debt against

Ningchang Zhenli as a result of the transfer of interest-bearing borrowings to the

Company from Ningchang Zhenli having been completed.



— 84 —


After the end of each accounting year during the compensation period, the Company shall instruct an accounting firm with securities qualification to carry out annual auditing of the Company and at the same time, issue specific audited report to confirm the actual profit before tax and financial expenses after deducting non-recurring gains and losses achieved by Ningchang Zhenli. If Communications Holdings is required to make any profit compensation, Communications Holdings shall compensate the Company such shortfall amount in the profit in cash, within 30 days after the specific audit report was issued.

Upon the completion of the Ninghchang Zhenli Equity Transfer Agreement, Ningchang Zhenli’s all interest-bearing borrowings and any finance costs incurred in the future would be borne by the Group, regardless of the completion of the Debt Transfer Agreement and the Profit Compensation Agreement. Communications Holdings is required to compensate to the Company for the shortfall in cash if the audited profit before tax and financial expenses after deducting non-recurring gains and losses of Ningchang Zhenli is less than the guaranteed profit before tax and financial expenses after deducting non-recurring gains and losses from 2015 to 2017 as stipulated in the Profit Compensation Agreement. Therefore, we concur with Directors’ view that the profit guarantee can reduce the downside risk of the financial performance of Ningchang Zhenli and is in the interest of the Company and the Shareholders as a whole.

6 Principal Terms of the Xiyi Company Transaction

The Xiyi Company Transaction consists of the Xiyi Company Equity Transfer Agreement and the Absorption and Merger Agreement. Guangjing Xicheng has entered into Xiyi Company Equity Transfer Agreement with Communications Holdings, Changzhou Expressway and Wuxi Expressway (together “Xiyi Company’s Shareholders”) respectively, and entered into the Absorption and Merger Agreement with Xiyi Company at the same time for the absorption of and merge with Xiyi Company.

Principal terms of the Xiyi Company Equity Transfer and the Absorption and Merger Agreement are set out in the Letter from the Board.

6.1 Equity Transfer Agreement

Guangjing Xicheng, a 85%-owned subsidiary of the Company, has entered into the Xiyi Company Equity Transfer Agreement, pursuant to which it has agreed to acquire the entire equity interest in Xiyi Company held by Xiyi Company’s Shareholders respectively at an aggregate consideration of RMB662,000,000. Guangjing Xicheng shall pay Xiyi Company’s Shareholders by way of cash within 30 working days after the Xiyi Company Equity Transfer Agreement becomes unconditional.

The conditions precedent of the Guangjing Xicheng Equity Transfer Agreement include:

(i) as part of the significant affiliated transaction of the Company, the Xiyi Company Equity Transfer Agreement and the transaction and the transaction price contemplated thereunder having been approved by the Shareholders in the general meeting of the Company; and

— 85 —


(ii) the transactions contemplated under the Xiyi Company Equity Transfer Agreement

having been approved or registered by the state-owned assets management

department.

As confirmed by the Board, only condition precedent (ii) has been satisfied as at the


6.2 Absorption and Merger Agreement

Guangjing Xicheng shall transfer all assets, liabilities, business and personnel of Xiyi

Company to Guangjing Xicheng pursuant to the Absorption and Merger Agreement. Upon

the absorption and merger, Guangjing Xicheng, as the absorber, will continue to exist and

Xiyi Company, as the absorbee, will cease to exist.

The conditions precedent of the Absorption and Merger Agreement:

(i) as part of the significant affiliated transaction of the Company, the Absorption

and Merger Agreement and the transaction and the transaction price contemplated

thereunder having been approved by the Shareholders in the general meeting of the

Company; and

(ii) all conditions precedent under the Xiyi Company Equity Transfer Agreement

between Guangjing Xicheng and Xiyi Company’s Shareholders respectively having

been satisfied.



7 Potential financial effects on the Group

Upon completion of the Ningchang Zhenli Transaction, Ningchang Zhenli will become a

wholly-owned subsidiary of the Company and be consolidated into the financial statement of the

Group. Pursuant to the Debt Transfer Agreement, all interest-bearing borrowings of Ningchang

Zhenli shall be assigned to the Company. Upon completion of the Xiyi Company Transaction,

Guangjing Xicheng shall absorb and merge with Xiyi Company at the same time, and its assets,

liabilities, revenue and expense will be consolidated into the financial statement of the Group

and Xiyi Company will cease to exist.

— 86 —


7.1 Earnings

As stated in paragraph 2.1.2 above, Ningchang Zhenli recorded net losses of

approximately RMB467 million, RMB450 million, RMB312 million and RMB241

million for the years ended 31 December 2012 and 2013 and the nine months ended 30

September 2013 and 2014 respectively.

Upon completion of the Ningchang Zhenli Transaction, all Ningchang Zhenli’s interest-

bearing borrowings shall be assigned to the Company and the Company shall capitalise

such debts into equity in accordance with the applicable laws. After all Ningchang

Zhenli’s interest-bearing borrowings assigning to the Company, the Company will bear

additional finance costs which can lead to a deduction in the income tax payable by the

Company. According to American Appraisal, it is expected that Ningchang Zhenli will

record net profit from 2015 onwards (after deducting the finance cost incurred by the

interest-bearing borrowing to be assigned to the Company pursuant to the Debt Transfer

Agreement) and be able to maintain growth within the forecast period, up to 2032.

Thus, Ningchang Zhenli will be able to enjoy the relevant policy which stipulates that

any profits before tax can be used to recover the cumulative loss for the previous five

years before the payment of enterprise income tax, therefore enabling the exemption or

reduction in enterprise income tax.

As stated in paragraph 2.2.2 above, Xiyi Company recorded net losses of approximately

RMB21 million, RMB28 million, RMB10 million and RMB3 million for the years ended

31 December 2012 and 2013 and the nine months ended 30 September 2013 and 2014

respectively. According to American Appraisal, it is expected that Xiyi Company will

record net profits from 2015 to 2027 and be able to maintain positive growth. However,

the concession period of certain highways will become expiry in 2028 if such concession

period cannot be extended, and the net profit of Xiyi Company may therefore decrease

gradually and result in net losses.

Despite the fact that Ningchang Zhenli and Xiyi Company recorded losses for the two

years ended 31 December 2013, having considered (i) the continuous development of

economy and toll highways in Jiangsu Province; (ii) the forecasted positive financial

performance of Ningchang Zhenli and Xiyi Company set out in the Traffic Reports and

AA Valuation Reports; and (iii) the expected benefits from the tax policy, the Directors

are of the view that the Transactions will bring positive effect on the earnings of the

Company in the long term.

— 87 —


7.2 Net asset value and gearing ratio

According to the “Unaudited Pro Forma Financial Information of the Enlarged Group” as

set out in Appendix VI to the Circular, if Ningchang Zhenli Equity Transfer and/or Xiyi

Company Equity Transfer have been completed on 30 September 2014:

(i) assuming that only the Ningchang Zhenli Transaction were to be conducted by the

Group, as at 30 September 2014, the net assets of the Company would decrease

from approximately RMB20,255 million to approximately RMB19,959 million

while the gearing ratio would increase from approximately 25.6% to approximately

42.8%;

(ii) assuming that only the Xiyi Company Transaction were to be conducted by the

Group, as at 30 September 2014, the net assets of the Company would decrease

from approximately RMB20,255 million to approximately RMB20,248 million

while the gearing ratio would increase from approximately 25.6% to approximately

31.8%; and

(iii) assuming that both the Transactions were to be conducted by the Group, as at 30

September 2014, the net assets of the Company would decrease from approximately

RMB20,255 million to approximately RMB19,953 million while the gearing ratio

would increase from approximately 25.6% to approximately 46.6%.

Although the gearing ratio of the Company would have been increased under all the above

three circumstances, it would still be below the average gearing ratio of the companies in

the toll road industry listed in Hong Kong.

— 88 —


The following table sets out the gearing ratios of the companies which are listed on the

Hong Kong Stock Exchange and are engaging in the toll road industry in the PRC as at

30 June 2014:

As at

30 June 2014

Company names Stock code Gearing ratio

Huayu Expressway Group Limited 1823.HK 87.4%

China Resources and Transportation Group Limited 269.HK 82.9%

Sichuan Expressway Company Limited – H shares 107.HK 55.4%

Shenzhen Expressway Company Limited – H shares 548.HK 50.5%

Shenzhen International Holdings Limited 152.HK 49.0%

Zhejiang Expressway Company Ltd. – H Shares 576.HK 42.9%

Yuexiu Transport Infrastructure Limited 1052.HK 41.7%

Anhui Expressway Company Limited – H shares 995.HK 37.2%

Hopewell Highway Infrastructure Limited 737.HK 10.4%

average: 50.8%

Source: Corresponding annual reports, interim reports or quarterly reports of the respective listed company published in the website of the Hong Kong Stock Exchange.

7.3 Cashflow position

As described in the Letter from the Board, the Considerations would be settled by the

Company and Guangjing Xicheng by its own fund and through the Company’s financing

activities. The distribution of maturation dates of all Ningchang Zhenli’s interest-

bearing borrowings has been set out in the Letter from the Board. It is expected that the

Transactions and the repayment of interest-bearing borrowings under the Debt Transfer

Agreement would lead to a decrease in the cash and bank balances of the Group and an

increase in the Company’s cash outflow.

— 89 —


According to the Third Quarterly Report of the Group and the unaudited consolidated

financial statements of Guangjing Xicheng for the nine months ended 30 September 2014,

the Group and Guangjing Xicheng had cash and bank balances of RMB563.2 million

and RMB160.7 million as at 30 September 2014, respectively. On 5 December 2014,

Guangjing Xicheng obtained a loan commitment letter of up to RMB650 million and,

according to the announcement of the Company dated 17 December 2014, the Company

issued nine-months bills on 11 December 2014 with total principal amount of RMB1

billion and issuing interest rate of 5.05%. Furthermore, as stated in the Letter from the

Board, for Ningchang Zhenli’s interest-bearing borrowings to be assigned to the Company

pursuant to the Debt Transfer Agreement, the maturation of such borrowings shall not

exceed RMB3 billion each year. According to the 2013 Annual Report, the net cash flow

from operating activities of the Group exceeded RMB3 billion for the years ended 31

December 2012 and 2013.

Hence, having considered (i) the cash and bank balances of the Group as at 30 September

2014; (ii) the banking facilities available to the Group as at the 30 November 2014 and

the aforementioned loan commitment letter; (iii) the bills issued by the Company on 11

December 2014; (iv) the historical net cash flow from operating activities of the Group;

(v) the gearing ratio of the Group amounting to approximately 25.6% as at 30 September

2014; and (vi) the AAA corporate credit rating of the Company for 2014 granted by

CCXI, we concur with the Board that the Company would have capacity to repay the

interest-bearing borrowings and the Group and Guangjing Xicheng have sufficient

financial resources to settle the Considerations.

Shareholders should note that the aforementioned analysis is for illustrative purposes only

and does not purport to represent how the financial position of the Company will be upon

completion of the Ningchang Zhenli Equity Transfer Agreement, the Debt Transfer Agreement,

the Profit Compensation Agreement, the Xiyi Company Equity Transfer Agreement and the

Absorption and Merger Agreement.

8 Alternative investment opportunities

As the Directors intends to expand the Group’s expressway network, deepen the development

strategies of the Company’s principal businesses, and strengthen the market position of the

Company in the expressway network of southern Jiangsu area through the Ningchang Zhenli

Transaction and the Xiyi Company Transaction, we have also considered the feasibility of

constructing new toll roads and bridges and acquiring other toll roads and bridges in the same

area.

— 90 —


As stated in the Letter from the Board, having considered that (i) the construction cost of

newly constructed expressway in the South Jiangsu region of similar grade, width and length

as those owned by Ningchang Zhenli and Xiyi Company would be substantially higher than

the Considerations; and (ii) the initial traffic flow for newly constructed expressway would be

less and an incubation period of several years would be required. Thus, the Directors are of the

opinion that the Transactions would be beneficial to the Company.

The Directors advised that the Group has been planning and preparing for future strategic

development, and have proactively focused and studied on the investment opportunities in

expressway and other traffic infrastructure areas. Further to the reasons and benefits stated in

the Letter from the Board, the Directors consider that Ningchang Zhenli Transaction and the

Xiyi Company Transaction are appropriate investment opportunities which will bring long-term

benefits for the Group. However, the Directors also stated that they will continue to actively

explore other suitable investment opportunities.

Having considered the above, we concur with the Directors that the Ningchang Zhenli

Transaction and the Xiyi Company Transaction are in line with the principle businesses and

strategic business development of the Group and in the interest of the Company and the

Shareholders as a whole.

9 Risk Factors

The Independent Shareholders should be aware of various risk factors that would pose

uncertainties to the Transactions, particularly the following principal risks:

9.1 Toll road operations

The operations of Ningchang Zhenli and Xiyi Company may be adversely affected by a

variety of events, including but not limited to natural disasters, serious traffic accidents,

and deterioration of macroeconomic environment in Jiangsu Province, nearby provinces

and the PRC. If the operation of Ningchang Zhenli and/or Xiyi Company is interrupted

in whole or in part for any extended period as a result of any such events, the financial

performance of Ningchang Zhenli and/or Xiyi Company, will be adversely affected.

— 91 —


9.2 Toll road policy

The standard to receive toll fees from users of a toll road in Jiangsu Province requires

the approval of certain authorities as designated by Jiangsu provincial government. The

Independent Shareholders should note that no assurance that any future applications of

increases of toll rates will be approved by the relevant authorities or that the relevant

authorities will not require a toll rates reduction.

Besides, the toll road industry is affected by the government policies, for example, the

policies on toll-free travel for small passenger vehicles in major festivals and holidays,

the rationing restrictions on non-local passenger vehicles and trucks within the ring

road of Nanjing. Currently, it is uncertain whether or not any unfavorable policies will

be imposed for the expressway industry in China and/or Jiangsu Province in the future,

which would have a negative impact on the financial performance of Ningchang Zhenli

and/or Xiyi Company.

9.3 Competition

The profitability of Ningchang Zhenli and/or Xiyi Company may be adversely affected

by the existence of other means of transportation including airline, railways and

alternative highway routes. Moreover, there is no assurance that the national or provincial

government will not propose new highways in the Jiangsu Province, which may compete

with Ningchang Zhenli and/or Xiyi Company in the foreseeable future.

RECOMMENDATIONS

We have taken into consideration of the above principal factors and reasons, including:

(i) the overall trend of economic development in Jiangsu Province will remain positive in the

foreseeable future and the continuous increase in demand and ownership of vehicles in Jiangsu

Province will bring a positive impact on the growth in traffic volume and also the demand for

road transport in Jiangsu Province;

(ii) Ningchang Zhenli Transaction and Xiyi Company Transaction are in line with the principle

businesses and business strategic development of the Group, which helps expand its highway

network and strengthen its position in the industry in Jiangsu Province;

(iii) the toll roads and bridges operated by Ningchang Zhenli and Xiyi Company are expected to

maintain its operational and financial growth, and deliver positive return;

— 92 —


(iv) the potential financial effects on the Group; and

(v) the relevant risk factors.

Accordingly, we are of the opinion that (1) the terms of the Ningchang Zhenli Equity Transfer

Agreement, the Debt Transfer Agreement, the Profit Compensation Agreement, the Xiyi Company

Equity Transfer Agreement and the Absorption and Merger Agreement are fair and reasonable; (2)

the Ningchang Zhenli Transaction and the Xiyi Company Transaction have been entered into in the

ordinary and usual course of business of the Company; (3) the Ningchang Zhenli Transaction and

the Xiyi Company Transaction are in the interests of the Company and the Shareholders as a whole.

Therefore, we advise the Independent Board Committee to recommend the Independent Shareholders to

vote in favor of the relevant resolutions to approve the Ningchang Zhenli Equity Transfer Agreement,

the Debt Transfer Agreement, the Profit Compensation Agreement, the Xiyi Company Equity Transfer

Agreement, the Absorption and Merger Agreement and the transactions contemplated thereunder at the

Extraordinary General Meeting.

Yours faithfully,

For and on behalf of

Guotai Junan Capital Limited

Iris Leung

Executive Director

Note: Ms. Iris Leung is a responsible officer of Guotai Junan Capital Limited, and is a person licensed to carry out type 6 (advising on corporate finance) regulated activity under the SFO who has over 10 years of experience in corporate finance.

— 93 —

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

1. FINANCIAL INFORMATION OF THE GROUP

The financial information of the Group for each of the three years ended 31 December 2013 are

disclosed in the following documents which have been published on the websites of the Hong

Kong Stock Exchange (www.hkexnews.hk) and the Company (www.jsexpressway.com):

• the Company’s annual report for the year ended 31 December 2011 published on 20 April

2012 (pages 115 to 232);


2013 (pages 132 to 248); and


2014 (pages 128 to 258).

2. INDEBTEDNESS

For the purpose of this indebtedness statement, the “Group” includes the companies to be

acquired by the Company and its subsidiaries.

Borrowings

At the close of business on 30 November 2014, being the latest practicable date prior to

the printing of this circular for the purpose of ascertaining information contained in this

indebtedness statement, the Group had an aggregate outstanding indebtedness of approximately

RMB14,258,778,000, which was comprised of:

As at 30 November 2014

RMB’000

Bank Loans

Guaranteed and unsecured 1,480,778

Secured and unguaranteed 2,143,000

Unsecured and unguaranteed 1,340,000

Loans from non-bank financial institution


Loans from related party


— 94 —


As at

30 November 2014

RMB’000

Medium-term notes

Unsecured and unguaranteed 500,000

Private placement notes


Super short-term bonds


Total 14,258,778

As at the closing of business on 30 November 2014, some of the Group’s secured bank loans

were secured by the toll road operation rights of Guangjing expressway, Xicheng expressway,

Ningchang expressway and Zhenli expressway.

Authorized but unissued debt securities

As at the closing of business on 30 November 2014, the Group has authorized but unissued

short-term bonds in the amount of RMB1,000,000,000, super short-term bonds in the amount

of RMB3,000,000,000 and private placement notes in the amount of RMB1,500,000,000. The

issuance had been authorized by the PRC National Association of Financial Market Institutional

Investors.

Contingent liabilities

As at the closing of business on 30 November 2014, the Group had outstanding guarantees

granted for mortgage loans of its customers in the amount of approximately RMB177,242,000.

Save as disclosed above and apart from intra-group liabilities, the Group did not, at the close

of business on 30 November 2014, have any other outstanding loans, mortgages, charges,

debentures, loan capital and bank overdrafts or other similar indebtedness, financial leases or

hire purchase commitment, liabilities under acceptances (other than normal trade and other

payables), or acceptance credits or any guarantees or other material contingent liabilities.

— 95 —


3. WORKING CAPITAL

The Directors are of the opinion that, taking into account of the Enlarged Group’s available

financial resources including internally generated cash flows, bank facilities, authorised but

unissued debt securities and cash on hand, the Enlarged Group has sufficient working capital for

its present requirements, that is for at least 12 months from the date of this circular.

4. FINANCIAL AND OPERATING PROSPECTS OF THE GROUP

In 2014, affected by the opening of Lima Expressway and the traffic control on non-local lorries

of Nanjing Ring Road and the Second Nanjing Bridge, the traffic flow of the western part of

Shanghai-Nanjing Expressway, being the core asset of the Group, in particular, the traffic flow

of lorries, had decreased, and hence there was pressure on reaching the targeted toll revenue

for the whole year. With the completion of the acquisition of Ningchang Zhenli, it is expected

that the negative effect of Lima Expressway on toll revenue of the Group will be removed.

Further, it is expected that with the completion of the acquisition of Ningchang Zhenli and the

acquisition and merger of Xiyi Company, the Group toll road concessions and thus toll revenue

will be strengthened.

Along with the steady progress of comprehensively deepening reform, urbanization and the

transformation and upgrade of the regional economy, the future macro economy is expected

to develop steadily, which will facilitate a steady growth in the transportation and the traffic

demand. Meanwhile, with increasing vehicle ownerships among civilians and escalating

consumer spending, the demand for passenger and cargo transport on roads will continue to

grow steadily, thereby driving the sustainable development of the principal business of the

Group.

Based on the operating status and policy environment in 2014, the management believes that the

Group’s operations will face a certain amount of uncertainty.

According to the business development plan of the Group, the Group, while fully leveraging

its own capital, will actively seek more convenient financing channels and lower-cost financing

products, and raise funds by way of direct financing such as issuing short-term commercial

papers, to reduce finance costs and resolve capital supply and demand conflicts.

5. MATERIAL ADVERSE CHANGE

The Directors confirmed that, as at the Latest Practicable Date, they are not aware of any

material adverse change in the financial or trading position of the Group since 31 December

2013, being the date to which the latest published audited consolidated financial statements of

the Company were made up.

— 96 —

APPENDIX IIA ACCOUNTANTS’ REPORT ON NINGCHANG ZHENLI

The following is the text of a report in respect of Ningchang Zhenli from Deloitte Touche Tohmatsu

Certified Public Accountants LLP, the reporting accountants, prepared for the purpose of

incorporation in this circular.

德勤華永會計師事務所（特殊普通合伙）中國上海市延安東路222號外灘中心30樓郵政編碼：200002

Deloitte Touche Tohmatsu Certi�ed Public Accountants LLP30/F Bund Center222 Yan An Road EastShanghai 200002, PRC

23 January 2015

The Directors


Dear Sirs,

We set out below our report on the financial information (the “Financial Information”) of 江蘇寧常鎮溧高速公路有限公司(Jiangsu Ningchang Zhenli Expressway Company Limited, English translation

for identification purpose, referred to as “Ningchang Zhenli”) for each of the three years ended 31

December 2011, 2012, 2013 and nine months ended 30 September 2014 (the “Track Record Period”)

for inclusion in the circular of Jiangsu Expressway Company Limited (“Jiangsu Expressway”) dated

23 January 2015 (the “Circular”) issued in connection with the proposed acquisition of the 100%

equity interest of Ningchang Zhenli.

Ningchang Zhenli was established in the People’s Republic of China (the “PRC”) on 10 June 2004.

The registered and paid-up capital of Ningchang Zhenli is RMB3,328,850,000. Ningchang Zhenli is

engaged in construction, operation and management of the Ningchang expressway, Zhenli expressway

and the provision of other supporting services along the toll roads.

Ningchang Zhenli adopts 31 December as the financial year end date. The statutory financial

statements of Ningchang Zhenli were prepared in accordance with the relevant accounting policies

and financial regulations applicable to enterprises established in the PRC. The statutory financial

statements of Ningchang Zhenli for the year ended 31 December 2013 was audited by ShineWing

Certified Public Accountants Nanjing Branch (“信永中和會計師事務所南京分所”). The statutory

financial statements of Ningchang Zhenli for the years ended 31 December 2011 and 2012 were

audited by Jiangsu Tianhua DaPeng Accountants Co., Ltd. (“江蘇天華大彭會計師事務所有限公司”).

— 97 —


For the purpose of the preparation of this report, the directors of Ningchang Zhenli have prepared

the financial statements of Ningchang Zhenli for the Track Record Period in accordance with the

Accounting Standards for Business Enterprises (“ASBE”) issued by the China Ministry of Finance

(“MOF”) (the “Underlying Financial Statements”). We have undertaken an independent audit on

the Underlying Financial Statements in accordance with International Standards on Auditing (“ISA”)

issued by the International Auditing and Assurance Standards Board (“IAASB”). We have examined

the Financial Information in accordance with the Auditing Guideline 3.340 “Prospectuses and the

Reporting Accountant” issued by the Hong Kong Institute of Certified Public Accountants.

The Financial Information set out in this report has been prepared from the Underlying Financial

Statements and in accordance with the accounting policies set out in Note IV of Section A below.

The preparation of the Underlying Financial Statements is the responsibility of the directors of

Ningchang Zhenli. No adjustments were considered necessary to the Underlying Financial Statements

in the preparation of the Financial Information for inclusion in the Circular. The directors of Jiangsu

Expressway are responsible for the contents of the Circular in which this report is included. It is our

responsibility to compile the Financial Information set out in this report from the Underlying Financial

Statements, to form an independent opinion on the Financial Information and to report our opinion to

you.

In our opinion, on the basis of preparation set out in Note II of Section A, the Financial Information

gives, for the purpose of this report, a true and fair view of the state of affairs of Ningchang Zhenli

as at 31 December 2011, 31 December 2012, 31 December 2013, and 30 September 2014 and of the

results and cash flows of Ningchang Zhenli for the Track Record Period.

The comparative statement of profit or loss and other comprehensive income, statement of changes in

equity and statement of cash flows of Ningchang Zhenli for the nine months ended 30 September 2013

together with the notes thereon (the “September 2013 Financial Information”) have been extracted

from Ningchang Zhenli’s unaudited financial statements for the same period (the “September 2013

Underlying Financial Statements”) which were prepared by the directors of Ningchang Zhenli solely

for the purpose of this report.

We conducted our review of the September 2013 Financial Information in accordance with the

International Standard on Review Engagements 2410 “Review of Interim Financial Information

Performed by the Independent Auditor of the Entity” issued by the IAASB. Our review of the

September 2013 Financial Information consists of making enquiries, primarily of persons responsible

for financial and accounting matters, and applying analytical and other review procedures. A review

is substantially less in scope than an audit conducted in accordance with International Standards on

Auditing and consequently does not enable us to obtain assurance that we would become aware of

all significant matters that might be identified in an audit. Accordingly, we do not express an audit

opinion on the September 2013 Financial Information.

— 98 —


Based on our review, nothing has come to our attention that causes us to believe that the September

2013 Financial Information is not prepared, in all material respects, in accordance with the accounting

policies consistent with those used in the preparation of the Financial Information which conform with

ASBE.

A. FINANCIAL INFORMATION

STATEMENT OF FINANCIAL POSITION

Unit: RMB

Item Note (VIII)

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Current Assets:

Cash and bank balances 1 108,070,531.26 90,319,384.10 105,782,304.01 21,114,461.89

Accounts receivable 2 17,028,102.69 10,006,954.61 11,617,786.57 13,155,908.78

Prepayments 3 522,067.73 595,756.37 470,378.24 1,356,085.32

Other receivables 4 1,596,560.58 1,546,545.89 2,224,840.42 49,200,575.32

Inventories 5 609,311.02 679,668.79 761,794.74 1,246,834.22

Total Current Assets 127,826,573.28 103,148,309.76 120,857,103.98 86,073,865.53

Non-current Assets:

Available-for-sale

financial assets 6 11,230,000.00 11,230,000.00 8,150,000.00 8,150,000.00

Fixed assets 7 526,609,250.49 550,265,490.55 623,606,065.28 704,419,245.34

Construction in progress 8 — 5,254,742.82 373,540.00 50,000,000.00

Intangible assets 9 7,018,361,684.03 7,218,142,298.89 7,402,651,137.76 7,489,747,111.40

Deferred tax assets 10 — — — —

Total Non-current Assets 7,556,200,934.52 7,784,892,532.26 8,034,780,743.04 8,252,316,356.74

TOTAL ASSETS 7,684,027,507.80 7,888,040,842.02 8,155,637,847.02 8,338,390,222.27

— 99 —


Unit: RMB

Item Note (VIII)

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Current Liabilities:

Short-term borrowings 12 1,035,000,000.00 1,580,000,000.00 1,315,000,000.00 1,435,000,000.00

Accounts payable 13 29,033,781.38 37,974,495.67 80,065,606.41 87,333,061.15

Receipts in advance 69,035.00 — — 22,000.00

Employee benefits payable 14 2,854,661.99 2,908,938.99 2,615,390.30 1,601,129.47

Taxes payable 15 2,194,193.04 3,182,173.34 4,085,798.22 2,211,092.66

Other payables 16 52,167,184.56 5,883,799.94 4,589,860.34 4,825,341.40

Interest payable 17 55,235,198.81 41,544,595.42 25,262,561.78 14,688,625.56

Non-current liabilities

due within one year 18 499,000,000.00 687,600,000.00 729,900,000.00 338,000,000.00

Total Current Liabilities 1,675,554,054.78 2,359,094,003.36 2,161,519,217.05 1,883,681,250.24

Non-current Liabilities:

Long-term borrowings 19 5,761,500,000.00 5,040,000,000.00 5,054,100,000.00 5,334,500,000.00

Other non-current liabilities 20 36,470,363.93 37,820,117.28 38,896,479.38 39,625,670.49

Total Non-current liabilities 5,797,970,363.93 5,077,820,117.28 5,092,996,479.38 5,374,125,670.49

TOTAL LIABILITIES 7,473,524,418.71 7,436,914,120.64 7,254,515,696.43 7,257,806,920.73

Shareholders’ Equity:

Share capital 21 3,328,850,000.00 3,328,850,000.00 3,328,850,000.00 150,000,000.00

Capital reserve 22 — — — 2,891,680,000.00

Accumulated losses 23 -3,118,346,910.91 -2,877,723,278.62 -2,427,727,849.41 -1,961,096,698.46

Total Shareholders’ Equity 210,503,089.09 451,126,721.38 901,122,150.59 1,080,583,301.54

TOTAL LIABILITIES AND

SHAREHOLDERS’

EQUITY 7,684,027,507.80 7,888,040,842.02 8,155,637,847.02 8,338,390,222.27

— 100 —


STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Unit: RMB

Item Note (VIII)

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30

September 2013 Year 2013 Year 2012 Year 2011

(Unaudited)

1. Total operating income 24 491,652,148.34 329,673,306.63 456,139,816.40 422,897,956.80 442,510,670.03

Less: Operating costs 24 350,308,388.88 274,278,801.42 404,429,347.39 361,749,246.98 298,244,614.97

Business taxes

and levies 25 16,912,247.04 11,320,557.09 15,699,548.23 14,621,080.58 15,077,067.20

Administrative expenses 26 10,154,641.29 11,208,335.47 19,107,332.66 22,554,543.11 16,106,478.89

Financial expenses 27 354,499,614.46 346,666,489.92 467,439,953.25 488,510,563.71 444,048,850.87

Impairment loss

of assets 28 849,990.00 — 772,417.20 139,499.00 —

2. Operating profit (loss) -241,072,733.33 -313,800,877.27 -451,308,782.33 -464,676,976.58 -330,966,341.90

Add: Non-operating income 29 2,054,905.88 3,755,360.00 4,905,782.16 2,238,156.73 2,437,659.91

Less: Non-operating expenses 30 1,605,804.84 2,092,670.40 3,592,429.04 4,192,331.10 5,101,809.97

Including: Losses from

disposal of

non-current

assets 279,030.99 8,257.79 8,257.79 1,476,810.07 —

3. Total profit (loss) -240,623,632.29 -312,138,187.67 -449,995,429.21 -466,631,150.95 -333,630,491.96

Less: Income tax expenses 31 — — — — —

4. Net profit (loss) -240,623,632.29 -312,138,187.67 -449,995,429.21 -466,631,150.95 -333,630,491.96

5. Net other comprehensive

income — — — — —

6. Total comprehensive income -240,623,632.29 -312,138,187.67 -449,995,429.21 -466,631,150.95 -333,630,491.96

— 101 —


STATEMENT OF CASH FLOWS

Unit: RMB

Item Note (VIII)

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

1. Cash Flows from

Operating Activities:

Cash receipts from the sale of

goods and the rendering

of service 483,850,045.26 324,913,927.52 456,984,957.36 424,274,580.01 445,650,580.25

Other cash receipts relating

to operating activities 34 48,675,414.99 2,641,891.52 4,173,265.73 3,699,071.79 4,181,720.63

Sub-total of cash inflows

from operating activities 532,525,460.25 327,555,819.04 461,158,223.09 427,973,651.80 449,832,300.88

Cash payments for goods

purchased and

services received 34,368,611.04 70,132,668.50 84,874,544.98 22,496,353.53 54,417,309.84

Cash payments to and

on behalf of employees 62,011,352.66 55,614,737.58 97,923,829.61 91,703,897.25 80,409,599.65

Payments of various types

of taxes 19,258,939.02 14,885,998.51 20,126,791.56 20,415,411.94 15,752,970.34

Other cash payments relating


Sub-total of cash outflows


Net Cash Flow from

Operating Activities 35 414,693,754.63 183,494,069.62 254,314,469.60 288,866,870.34 289,619,933.81

— 102 —


Unit: RMB

Item Note (VIII)

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

2. Cash Flows from

Investing Activities:

Cash receipts from disposals

and recovery of investments 27,720.00 4,341,984.10 4,341,984.10 2,030,879.32 —


from investing activities 27,720.00 4,341,984.10 4,341,984.10 2,030,879.32 —

Cash payments to acquire

or construct fixed assets,

intangible assets and other

long-term assets 42,416,252.61 18,000,689.38 27,153,566.95 51,780,164.90 58,323,745.59

Cash payments to

acquire investments — 3,080,000.00 3,080,000.00 — —


from investing activities 42,416,252.61 21,080,689.38 30,233,566.95 51,780,164.90 58,323,745.59

Net Cash Flow used

in Investing Activities -42,388,532.61 -16,738,705.28 -25,891,582.85 -49,749,285.58 -58,323,745.59

— 103 —


Unit: RMB

Item Note (VIII)

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

3. Cash Flows from

Financing Activities:

Cash receipts from

capital contributions — — — 287,170,000.00 —

Cash receipts from borrowings 1,755,000,000.00 2,140,000,000.00 2,460,000,000.00 2,035,000,000.00 1,435,000,000.00


to Financing activities 34 — — — 45,978,741.51 26,900,561.02


from financing activities 1,755,000,000.00 2,140,000,000.00 2,460,000,000.00 2,368,148,741.51 1,461,900,561.02

Cash repayments of loans 1,767,100,000.00 2,018,500,000.00 2,251,400,000.00 2,043,500,000.00 1,248,500,000.00

Cash payments for distribution

of dividends or profits

or settlement of

interest expenses 342,454,074.86 333,138,291.12 452,485,806.66 479,098,484.15 443,443,701.85


from financing activities 2,109,554,074.86 2,351,638,291.12 2,703,885,806.66 2,522,598,484.15 1,691,943,701.85

Net Cash Flow used

in Financing Activities -354,554,074.86 -211,638,291.12 -243,885,806.66 -154,449,742.64 -230,043,140.83

4. Net Increase (decrease) in

Cash and Cash Equivalents 17,751,147.16 -44,882,926.78 -15,462,919.91 84,667,842.12 1,253,047.39

Add: Opening balance of Cash

and Cash Equivalents 90,319,384.10 105,782,304.01 105,782,304.01 21,114,461.89 19,861,414.50

5. Closing Balance of Cash

and Cash Equivalents 108,070,531.26 60,899,377.23 90,319,384.10 105,782,304.01 21,114,461.89

— 104 —


STATEMENT OF CHANGES IN EQUITY

Unit: RMB

From 1 January 2014 to 30 September 2014

Item

Share

capital

Capital

reserve

Accumulated

Losses

Total owners’

equity

1. Balance at 1 January 2014 3,328,850,000.00 — -2,877,723,278.62 451,126,721.38

2. Changes for the period

(1) Total comprehensive income — — -240,623,632.29 -240,623,632.29

3. Balance at 30 September 2014 3,328,850,000.00 — -3,118,346,910.91 210,503,089.09

From 1 January 2013 to 30 September 2013 (Unaudited)

Item

Share

capital

Capital

reserve

Accumulated

Losses

Total owners’

equity




3. Balance at 30 September 2013 3,328,850,000.00 — -2,739,866,037.08 588,983,962.92

Year 2013

Item

Share

capital

Capital

reserve

Accumulated

Losses

Total owners’

equity


2. Changes for the year


3. Balance at 31 December 2013 3,328,850,000.00 — -2,877,723,278.62 451,126,721.38

— 105 —


Year 2012

Item

Share

capital

Capital

reserve

Accumulated

Losses

Total owners’

equity

1. Balance at 1 January 2012 150,000,000.00 2,891,680,000.00 -1,961,096,698.46 1,080,583,301.54



3. Owners’ contributions and

reduction in capital

(1) Capital contribution from owners 287,170,000.00 — — 287,170,000.00

4. Transfers within owners’ equity

(1) Capitalization of capital reserve 2,891,680,000.00 -2,891,680,000.00 — —

5. Balance at 31 December 2012 3,328,850,000.00 — -2,427,727,849.41 901,122,150.59

Year 2011

Item

Share

capital

Capital

reserve

Accumulated

Losses

Total owners’

equity

1. Balance at 1 January 2011 150,000,000.00 2,891,680,000.00 -1,627,466,206.50 1,414,213,793.50



3. Balance at 31 December 2011 150,000,000.00 2,891,680,000.00 -1,961,096,698.46 1,080,583,301.54

— 106 —


(I) GENERAL INFORMATION

Ningchang Zhenli is a limited company incorporated in Nanjing, Jiangsu province on 10

June 2004 with registered capital of RMB150,000,000.00 when established, in which Jiangsu

Communications Holdings Company Limited contributed RMB105,000,000.00 accounting

for 70% of the registered capital; Changzhou Expressway Investment Development Company

Limited contributed RMB30,210,000.00 accounting for 20.% of the registered capital; Zhenjiang

Communications Investment Construction Development Company Limited contributed

RMB11,955,000.00 accounting for 8% of the registered capital; Nanjing Communications

Construction Investment Holding (Group) Company Limited contributed RMB2,835,000.00

accounting for 2% of the registered capital. Ningchang Zhenli gets the business licence with the

registration number 320000000019587.

On September 2011, Nanjing Communications Construction Investment Holding (Group)

Company Limited holds 2% stake of Ningchang Zhenli as capital contribution to Nanjing

Highway Development (Group) Company Limited. Thereafter, Nanjing Highway Development

(Group) Company Limited becomes a shareholder of Ningchang Zhenli.

On December 2012, the registered capital of Ningchang Zhenli changes to RMB3,328,850,000,

in which J iangsu Communicat ions Holdings Company Limited contr ibuted

RMB2,910,415,000.00 accounting for 87% of the registered capital; Zhenjiang Communications

Investment Construction Development Company Limited contributed RMB265,310,000.00

accounting for 8% of the registered capital; Changzhou Expressway Investment Development

Company Limited contributed RMB90,210,000.00 accounting for 3% of the registered capital;

Nanjing Highway Development (Group) Company Limited contributed RMB62,915,000.00

accounting for 2% of the registered capital.

On September 2014, Zhenjiang Communications Investment Construction Development

Company Limited, Changzhou Expressway Investment Development Company Limited and

Nanjing Highway Development (Group) Company Limited transferred the 8%, 3% and 2%

ownership in Ningchang Zhenli to Jiangsu Communications Holdings Company Limited

respectively.

Ningchang Zhenli is engaged in construction, operation and management of the Ningchang

expressway, Zhenli expressway and the provision of other supporting services along the toll

roads.

Jiangsu Communications Holdings Company Limited (“Communications Holdings”) is both

the parent company and the ultimate holding company of Ningchang Zhenli.

— 107 —


(II) BASIS OF PREPARATION OF FINANCIAL INFORMATION

Ningchang Zhenli has adopted the ASBE issued by the MOF, and applied the new and revised

ASBE that has been issued in 2014, which include ASBE No.39-Fair Value Measurement,

ASBE No.40-Joint Arrangements, ASBE No.41-Disclosure of Interests in Other Entities, revised

ASBE No.2-Long-term Equity Investment, ASBE No.9-Employee Benefits, ASBE No.30-

Presentation of Financial Statements, ASBE No.33-Consolidated Financial Statements, ASBE

No. 37-Presentation of Financial Instruments. The purpose of this Financial Information is for

the proposed Jiangsu Expressway acquisition of the 100% equity interest of Ningchang Zhenli,

therefore, this Financial Information is prepared according to above mentioned ASBE since 1

January 2011.

Ningchang Zhenli has disclosed relevant financial information in accordance with Information

Disclosure and Presentation Rules for Companies Making Public Offering Securities to the

Public No. 15 General Provisions on Financial Reporting (Revised in 2010).

In addition, the Financial Information includes applicable disclosures required by the Rules

Governing the Listing of Securities on The Stock Exchange of Hong Kong Listed and the

Hong Kong Companies Ordinance which for the Track Record Period continue to be those of

the predecessor Companies Ordinance (Cap. 32), in accordance with transitional and saving

arrangements for Part 9 of the Hong Kong Companies Ordinance (Cap. 622), “Accounts and

Audit”, which are set out in sections 76 to 87 of Schedule 11 of the Ordinance.

Going Concern

As at 30 September 2014, Ningchang Zhenli had total current liabilities in excess of total

current assets of RMB1,547,727,481.50 and total accumulated losses RMB3,118,346,910.91.

The main current liabilities included the entrusted loans provided by Communications

Holdings and its affiliated enterprise is RMB470,000,000.00, short-term loans from non-bank

financial institution provided by Jiangsu Communications Holdings Group Finance Company

Limited is RMB195,000,000.00, and short-term bonds and private placement bonds issued by

Communications Holdings in which RMB600,000,000.00 is allocated to Ningchang Zhenli.

— 108 —


Jiangsu Expressway plans to acquire the equity of Ningchang Zhenli from Communications

Holdings and other shareholders. Communications Holding’s management has agreed not to

request repayment of outstanding balances owing to it and its affiliated enterprises, to provide

all necessary financial support to Ningchang Zhenli in the foreseeable future so as to maintain

the Ningchang Zhenli’s ability to continue as a going concern before Communications Holdings

sold the equity in Ningchang Zhenli. Furthermore, management of Ningchang Zhenli and

Jiangsu Expressway promise that Jiangsu Expressway will succeed Communications Holdings

and its affiliated enterprises to become the above debt’s owner and convert the debt into equity,

or provide necessary financial support to maintain Ningchang Zhenli’s ability to continue as a

going concern after Jiangsu Expressway becomes the shareholder of Ningchang Zhenli. Hence,

the Financial Information has been prepared on a going concern basis.

(III) THE STATEMENT OF COMPLIANCE WITH THE ACCOUNTING STANDARDS

FOR ENTERPRISES

The Financial Information of Ningchang Zhenli has been prepared in accordance with ASBE,

and present truly and completely, Ningchang Zhenli’s financial position as of 30 September

2014, 31 December 2013, 31 December 2012 and 31 December 2011, and Ningchang Zhenli’s

results of operation and cash flows for the period from 1 January 2014 to 30 September 2014,

the period from 1 January 2013 to 30 September 2013, year 2013, 2012 and 2011.

— 109 —


(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES

1. Accounting period

Ningchang Zhenli has adopted the calendar year as its accounting year, i.e. from 1

January to 31 December. The most recently presented period is from 1 January 2014 to

30 September 2014.

2. Functional currency

Renminbi (“RMB”) is the currency of the primary economic environment in which

Ningchang Zhenli operates. Therefore, Ningchang Zhenli chooses RMBas their functional

currency.

3. Basis of accounting and principle of measurement

Ningchang Zhenli has adopted the accrual basis of accounting. Except for certain financial

instruments which are measured at fair value, Ningchang Zhenli adopts the historical cost

as the principle of measurement in the Financial Information. Where assets are impaired,

provisions for asset impairment are made in accordance with relevant requirements.

Under the historical cost measurement, assets are recorded at the amount of cash or cash

equivalents paid or the fair value of the consideration given to acquire them at the time of

their acquisition; liabilities are carried at the amount of the proceeds or assets received in

exchange for the obligation or at the amounts of cash or cash equivalents expected to be

paid to satisfy the liability in the normal course of business.

Fair value is the price that would be received to sell an asset or paid to transfer a liability

in an orderly transaction between market participants at the measurement date, regardless

of whether that price is directly observable or estimated using another valuation

technique. Fair value for measurement and/or disclosure purposes in Ningchang Zhenli’s

Financial Information is determined on such a basis.

— 110 —


Fair value measurements are categorized into Level 1, 2 or 3 based on the degree to

which the inputs to the fair value measurements are observable and the significance of the

inputs to the fair value measurement in its entirety, which are described as follows:

Level 1 inputs are unadjusted quoted prices in active markets for identical assets of

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;

Level 3 inputs are unobservable inputs for the asset or liability.

4. Cash and cash equivalents

Cash comprises cash on hand and deposits that can be readily withdrawn on demand.

Cash equivalents are Ningchang Zhenli’s short-term, highly liquid investments that are

readily convertible to known amounts of cash and which are subject to an insignificant

risk of changes in value.

5. Financial instruments

Financial assets and financial liabilities are recognized when Ningchang Zhenli becomes

a party to the contractual provisions of the instrument. Financial assets and financial

liabilities are initially measured at fair value. For financial assets and financial liabilities

at fair value through profit or loss, transaction costs are immediately recognized in profit

or loss. For other financial assets and financial liabilities, transaction costs are included in

their initial recognized amounts.

— 111 —


5.1 Effective interest method

The effective interest method is a method of calculating the amortized cost of a

financial asset or a financial liability (or a group of financial assets or financial

liabilities) and of allocating the interest income or interest expense over the

relevant period, using the effective interest rate. The effective interest rate is the

rate that exactly discounts estimated future cash flows through the expected life of

the financial asset or financial liability or, where appropriate, a shorter period to

the net carrying amount of the financial asset or financial liability.

When calculating the effective interest rate, Ningchang Zhenli estimates future

cash flows considering all contractual terms of the financial asset or financial

liability (without considering future credit losses), and also considers all fees paid

or received between the parties to the contract giving rise to the financial asset and

financial liability that are an integral part of the effective interest rate, transaction

costs, and premiums or discounts, etc.

5.2 Classification, recognition and measurement of financial assets

On initial recognition, the financial assets are classified into one of the four

categories, including financial assets at fair value through profit or loss, held-

to-maturity investments, loans and receivables, and available-for-sale financial

assets. All regular way purchases or sales of financial assets are recognized and

derecognized on a trade date basis. Ningchang Zhenli’s financial assets mainly

represent loans and receivables, and available-for-sale financial assets.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable

payments that are not quoted in an active market. Financial assets classified as

loans and receivables by Ningchang Zhenli include accounts receivable and other

receivables.

Loans and receivables are subsequently measured at amortized cost using the

effective interest method. Gain or loss arising from derecognition, impairment or

amortization is recognized in profit or loss.

— 112 —


Available-for-sale financial assets

Available-for-sale financial assets include non-derivative financial assets that are

designated on initial recognition as available for sale, and financial assets that

are not classified as financial assets at fair value through profit or loss, loans and

receivables or held-to-maturity investments.

Available-for-sale financial assets are subsequently measured at fair value,

and gains or losses arising from changes in the fair value are recognized as

other comprehensive income, except that impairment losses and exchange

differences related to amortized cost of monetary financial assets denominated in

foreign currencies are recognized in profit or loss, until the financial assets are

derecognized, at which time the gains or losses are released and recognized in

profit or loss.

Interests obtained and the dividends declared by the investee during the period in

which the available-for-sale financial assets are held, are recognized in investment

gains.

For investments in equity instruments that do not have a quoted market price in

an active market and whose fair value cannot be reliably measured, and derivative

financial assets that are linked to and must be settled by delivery of such unquoted

equity instruments, they are measured at cost.

5.3 Impairment of financial assets

Ningchang Zhenli assesses at the end of each reporting period the carrying amounts

of financial assets other than those at fair value through profit or loss. If there is

objective evidence that a financial asset is impaired, Ningchang Zhenli determines

the amount of any impairment loss. Objective evidence that a financial asset is

impaired is evidence that, arising from one or more events that occurred after the

initial recognition of the asset, the estimated future cash flows of the financial

asset, which can be reliably measured, have been affected.

— 113 —


Objective evidence that a financial asset is impaired includes the following

observable events:

(1) Significant financial difficulty of the issuer or obligor;

(2) A breach of contract by the borrower, such as a default or delinquency in

interest or principal payments;

(3) Ningchang Zhenli, for economic or legal reasons relating to the borrower’s

financial difficulty, granting a concession to the borrower;

(4) It becoming probable that the borrower will enter bankruptcy or other

financial reorganizations;

(5) The disappearance of an active market for that financial asset because of

financial difficulties of the issuer;

(6) Upon an overall assessment of a group of financial assets, observable data

indicates that there is a measurable decrease in the estimated future cash

flows from the group of financial assets since the initial recognition of those

assets, although the decrease cannot yet be identified with the individual

financial assets in the group. Such observable data includes:

— Adverse changes in the payment status of borrower in the group of

assets;

— Economic conditions in the country or region of the borrower which

may lead to a failure to pay the group of assets;

(7) Significant adverse changes in the technological, market, economic or legal

environment in which the equity instrument issuer operates, indicating that

the cost of the investment in the equity instrument may not be recovered by

the investor;

(8) A significant or prolonged decline in the fair value of an investment in an

equity instrument below its cost;

— 114 —


(9) Other objective evidence indicating there is an impairment of a financial

asset.

— Impairment of financial assets measured at amortised cost

If financial assets carried at amortized cost are impaired, the carrying

amounts of the financial assets are reduced to the present value of estimated

future cash flows (excluding future credit losses that have not been incurred)

discounted at the financial asset’s original effective interest rate. The

amount of reduction is recognized as an impairment loss in profit or loss.

If, subsequent to the recognition of an impairment loss on financial assets

carried at amortized cost, there is objective evidence of a recovery in value

of the financial assets which can be related objectively to an event occurring

after the impairment is recognized, the previously recognized impairment

loss is reversed. However, the reversal is made to the extent that the carrying

amount of the financial asset at the date the impairment is reversed does not

exceed what the amortized cost would have been had the impairment not

been recognized.

For a financial asset that is individually significant, Ningchang Zhenli

assesses the asset individually for impairment. For a financial asset that is not

individually significant, Ningchang Zhenli assesses the asset individually for

impairment or includes the asset in a group of financial assets with similar

credit risk characteristics and collectively assesses them for impairment.

If Ningchang Zhenli determines that no objective evidence of impairment

exists for an individually assessed financial asset (whether significant or

not), it includes the asset in a group of financial assets with similar credit

risk characteristics and collectively reassesses them for impairment. Assets

for which an impairment loss is individually recognized are not included in a

collective assessment of impairment.

— 115 —


— Impairment of available-for-sale financial assets

When an available-for-sale financial asset is impaired, the cumulative loss

arising from decline in fair value previously recognized directly in capital

reserve is reclassified from the capital reserve to profit or loss. The amount

of the cumulative loss that is reclassified from capital reserve to profit or

loss is the difference between the acquisition cost (net of any principal

repayment and amortization) and the current fair value, less any impairment

loss on that financial asset previously recognized in profit or loss.

If subsequent to the recognition of an impairment loss on available-for-sale

financial assets, there is objective evidence of a recovery in value of the

financial assets which can be related objectively to an event occurring after

the impairment is recognized, the previously recognized impairment loss is

reversed. The amount of reversal of impairment loss on available-for-sale

equity instruments is recognized as other comprehensive income, while the

amount of reversal of impairment loss on available-for-sale debt instruments

is recognized in profit or loss.

5.4 Classification, recognition and measurement of financial liabilities

Financial instruments or components of financial instruments issued by Ningchang

Zhenli are classified into financial liabilities or equity on the basis of the substance

of the contractual arrangements of the financial instruments issued and definitions

of financial liability and equity instrument on initial recognition.

On initial recognition, financial liabilities are classified into financial liabilities at

fair value through profit or loss and other financial liabilities. Ningchang Zhenli’s

financial liabilities mainly represent other financial liabilities.

5.4.1 Other financial liabilities

Other financial liabilities are subsequently measured at amortized cost using

the effective interest method, with gain or losses arising from derecognition

or amortization recognized in profit or loss.

— 116 —


5.5 Derecognition of Financial Liabilities

Ningchang Zhenli derecognizes a financial liability (or part of it) only when the

underlying present obligation (or part of it) is discharged. An agreement between

Ningchang Zhenli (an existing borrower) and an existing lender to replace the

original financial liability with a new financial liability with substantially different

terms is accounted for as an extinguishment of the original financial liability and

the recognition of a new financial liability.

When Ningchang Zhenli derecognizes a financial liability or a part of it, it

recognizes the difference between the carrying amount of the financial liability (or

part of the financial liability) derecognized and the consideration paid (including

any non-cash assets transferred or new financial liabilities assumed) in profit or

loss.

5.6 Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets

of Ningchang Zhenli after deducting all of its liabilities. The consideration received

from issuing equity instruments, net of transaction costs, are added to shareholders

equity. Issuance (including refinancing), repurchase, sale or cancellation of equity

instruments as a process of changes in equity. Ningchang Zhenli does not recognize

any changes in the fair value of equity instruments. Transaction costs related to the

transaction with equity are deducted from equity. All types of distributions made

by Ningchang Zhenli to holders of equity instruments are as the profit allocation

process.

5.7 Offsetting financial assets and financial liabilities

Where Ningchang Zhenli has a legal right that is currently enforceable to set off

the recognized financial assets and financial liabilities, and intends either to settle

on a net basis, or to realize the financial asset and settle the financial liability

simultaneously, a financial asset and a financial liability shall be offset and the net

amount is presented in the statement of financial position. Except for the above

circumstances, financial assets and financial liabilities shall be presented separately

in the statement of financial position and shall not be offset.

— 117 —


6. Accounts receivable

6.1 Receivables that are individually significant and for which bad debt provision is

individually assessed

Basis or monetary criteria

for determining an

individually significant

receivable

An accounts receivable that exceeds

RMB2,500,000.00 or other receivable and

prepayment that exceeds RMB750,000.00 is

deemed as an individually significant receivable

by Ningchang Zhenli.

Method of determining

provision for receivables

that are individually

significant and for which

bad debt provision

is individually assessed

For receivables that are individually significant,

Ningchang Zhenli assesses the receivables

individually for impairment. For a financial

asset that is not impaired individually,

Ningchang Zhenli includes the asset in a

group of financial assets with similar credit

risk characteristics and collectively assesses

them for impairment. Receivables for which

an impairment loss is individually recognized

are not included in a collective assessment of

impairment.

6.2 Accounts receivable that are not individually significant but for which bad debt

provision is individually assessed

Reasons for making

individual bad debt

provision

Those accounts receivables with not significant

amount and small credit risk such as related

party transactions, petty cash and other single

but not significant amount accrues provision

according to the existing objective evidence of

impairment.

Bad debt provision methods Bad debt provision is individually assessed.

— 118 —


6.3 Receivables for which bad debt provision is collectively assessed on a portfolio

basis

Accounts receivable that are

not individually significant

but for which are not

devalued when provision

is individually assessed

Ningchangzhneli divides the receivables except

above 6.1 and 6.2 into several age groups

according to the nature of the receivables.

Based on the actual loss rate of the receivables

with the similarity and relevance of credit risk

characteristics and the degree of risk of the

receivables for the prior years, as well as the

current period’s actual situation, Ningchang

Zhenli determine the bad debt provision ratio

for various age groups of receivables, and

calculate the bad debt provision for each age

group of receivables according to the above

ratio.

Portfolios that aging analysis is used for bad debt provision

Aging

Provision as

a proportion

of accounts

receivable

Provision as

a proportion

of other

receivables

(%) (%)

within 1 year (include 1 year) 5% 5%

1–2 years (include 2 years) 20% 20%


Over 3 years 100% 100%

— 119 —


7. Inventories

The inventories mainly include spare parts for repairs and maintenance of toll roads

infrastructure, office supplies, consumables, stocks and raw materials for daily operations

and sales of service areas etc. Inventories are initially measured at cost. Cost of

inventories comprises all costs of purchase and other expenditures incurred in bringing

the inventories to their present location and condition.

The cost of inventories is calculated using the first-in-first-out method when delivered.

Consumables are amortized using the write-off method.

At the end of each reporting period, inventories are measured at the lower of cost and net

realizable value. If the net realizable value is below the cost of inventories, a provision

for decline in value of inventories is made.

Net realizable value is the estimated selling price in the ordinary course of business less

the estimated costs of completion, the estimated costs necessary to make the sale and

relevant taxes. Net realizable value is determined on the basis of clear evidence obtained,

and takes into consideration the purposes of holding inventories and effect of post

statement of financial position events.

Provision for decline in value of other inventories is made based on the excess of cost of

inventory over its net realizable value on an item-by-item basis.

After the provision for decline in value of inventories is made, if the circumstances that

previously caused inventories to be written down below cost no longer exist so that the

net realizable value of inventories is higher than their cost, the original provision for

decline in value is reversed and the reversal is included in profit or loss for the period.

The perpetual inventory system is maintained for inventory system.

— 120 —


8. Fixed assets

Fixed assets are tangible assets that are held for use in the production or supply of

services, for rental to others, or for administrative purposes, and have useful lives of

more than one accounting year. A fixed asset is recognized only when it is probable that

economic benefits associated with the asset will flow to Ningchang Zhenli and the cost

of the asset can be measured reliably. Fixed assets are initially measured at cost and the

effect of any expected costs of abandoning the asset at the end of its use is considered.

Subsequent expenditures incurred for the fixed asset are included in the cost of the fixed

asset and if it is probable that economic benefits associated with the asset will flow to

Ningchang Zhenli and the subsequent expenditures can be measured reliably. Meanwhile

the carrying amount of the replaced part is derecognized. Other subsequent expenditures

are recognized in profit or loss in the period in which they are incurred.

A fixed asset is depreciated over its useful life using the straight-line method since

the month subsequent to the one in which it is ready for intended use. The useful life,

estimated net residual value rate and annual depreciation rate of each category of fixed

assets are as follows:

Category

Depreciation

period

Residual

value rate

Annual

depreciation rate

(years) (%) (%)

Toll road structures 10–30 0 3.33–10

Safety equipment 10 3 9.7

Communication and

surveillance equipment 8 3 12.1

Toll and ancillary equipment 8 3 12.1

Machine and equipment 10 3 9.7

Electronic equipment 5 3 19.4

Motor vehicles 8 3 12.1

Furniture and others 5 3 19.4

Estimated net residual value of a fixed asset is the estimated amount that Ningchang

Zhenli would currently obtain from disposal of the asset, after deducting the estimated

costs of disposal, if the asset were already of the age and in the condition expected at the

end of its useful life.

— 121 —


If a fixed asset is upon disposal or no future economic benefits are expected to be

generated from its use or disposal, the fixed asset is derecognized. When a fixed asset is

sold, transferred, retired or damaged, the amount of any proceeds on disposal of the asset

net of the carrying amount and related taxes is recognized in profit or loss for the period.

Ningchang Zhenli reviews the useful life and estimated net residual value of a fixed asset

and the depreciation method applied at least once at each financial year-end, and account

for any change as a change in an accounting estimate.

9. Construction in progress

Construction in progress is measured at its actual costs. The actual costs include various

construction expenditures during the construction period, borrowing costs capitalized

before it is ready for intended use and other relevant costs. Construction in progress is not

depreciated. Construction in progress is transferred to a fixed asset when it is ready for

intended use.

10. Intangible assets

Intangible assets include toll road operation rights etc.

An intangible asset is measured initially at cost. When an intangible asset with a

finite useful life is available for use, its original cost less net residual value and any

accumulated impairment losses is amortized over its estimated useful life using the

straight-line method.

For an intangible asset with a finite useful life, Ningchang Zhenli reviews the useful life

and amortization method at the end of the period, and makes adjustments when necessary.

If Ningchang Zhenli has the right to charge a fee (as a price to provide construction

services in the service concession) for road users, Ningchang Zhenli measures the

intangible assets initially at fair value of received or receivable consideration. The amount

of toll road operation rights is presented according to the historical cost after deducting

amortization and impairment losses. The intangible asset is amortized using traffic volume

method based on the ratio of actual traffic volume compared to the total expected traffic

volume of the toll roads during operation period. When there is significant difference

between actual and estimated traffic volume, Ningchang Zhenli will re-evaluate the total

traffic volume and calculate the amortization amount.

— 122 —


11. Employee benefits

Ningchang Zhenli should recognize the actually occurred amount of short-term employee

benefits in the accounting period in which an employee provides service as a liability

with a corresponding charge to the profit or loss for the current period or in the cost

of relevant asset. Ningchang Zhenli should recognize the staff welfare according to the

actually occurred amount as an expense or in the cost of relevant asset when it actually

occurred. Employee benefits which are non-monetary are measured at fair value.

Payments made by Ningchang Zhenli of social security contributions for employees, such

as premiums or contributions on medical insurance, work injury insurance and maternity

insurance, payment of housing funds, and union running costs and employees education

costs provided in accordance with relevant requirements, in the accounting period in

which an employee provides services, are calculated according to prescribed bases and

percentages of provisions in determining the amount of employee benefits and recognize

relevant liabilities with a corresponding charge to the profit of loss for the current period

or the cost of a relevant asset.

Ningchang Zhenli should recognize, in the accounting period in which an employee

provides service, the contribution payable to a defined contribution plan as a liability,

with a corresponding charge to the profit or loss for the current period or the cost of a

relevant asset.

When Ningchang Zhenli provide termination benefit to their staff, a liability should be

recognized for termination benefits with a corresponding charge to the current year profit

or loss at the earlier of the following dates: when Ningchang Zhenli cannot unilaterally

withdraw the offer of those benefits because of an employment termination plan or a

curtailment proposal; and when Ningchang Zhenli recognizes costs or expenses related to

a restructuring that involves the payment of termination benefits.

For other long-term employee benefits, satisfied the conditions of defined contribution

plan, are accounted for in accordance with the relevant requirements of the above defined

contribution plan.

— 123 —


12. Revenue recognition

12.1 Toll revenue

Toll revenue is the income from operation of toll roads, which is recognized on a

receipt basis.

12.2 Revenue from rendering of services

Revenue from rendering of services of Ningchang Zhenli include: ancillary services

and emergency assistance, advertising income etc. Revenue from rendering of

services is recognized when services are rendered; the amount of revenue can be

measured reliably, and it is probable that the associated economic benefits will

flow to Ningchang Zhenli.

12.3 Revenue from sale of goods

Revenue from sale of goods is recognized when Ningchang Zhenli has transferred

to the buyer the significant risks and rewards of ownership of the goods; Ningchang

Zhenli 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 associated economic

benefits will flow to Ningchang Zhenli; and the associated costs incurred or to be

incurred can be measured reliably.

12.4 Interest income

Interest income is accrued on a time basis, by reference to the effective interest rate

applicable.

— 124 —


13. Government grants

Government grants are transfer of monetary assets and non-monetary assets from the

government to Ningchang Zhenli at no consideration. A government grant is recognized

only when Ningchang Zhenli can comply with the conditions attaching to the grant and

Ningchang Zhenli will receive the grant.

If a government grant is in the form of a transfer of a monetary asset, it is measured at

the amount received or receivable. Government grants are classified as grants related

to assets and grants related to income, according to the grant objects which have been

clearly defined in the government documents.

A government grant related to an asset is recognized as deferred income, and evenly

amortized to profit or loss over the useful life of the relevant asset. For a government

grant related to income, if the grant is a compensation for related expenses or losses

to be incurred in subsequent periods, the grant is recognized as deferred income, and

recognized in profit or loss over the periods in which the related costs are recognized. If

the grant is a compensation for related expenses or losses already incurred, the grant is

recognized immediately in profit or loss for the period.

14. Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of

qualifying asset are capitalized when expenditures for such asset and borrowing costs

are incurred and activities relating to the acquisition, construction or production of the

asset that are necessary to prepare the asset for its intended use or sale have commenced.

Capitalization of borrowing costs ceases when the qualifying asset being acquired,

constructed or produced becomes ready for its intended use or sale. Capitalization of

borrowing costs is suspended during periods in which the acquisition, construction or

production of a qualifying asset is suspended abnormally and when the suspension is

for a continuous period of more than 3 months. Capitalization is suspended until the

acquisition, construction or production of the asset is resumed.

Other borrowing costs are recognized as an expense in the period in which they are

incurred.

— 125 —


Where funds are borrowed under a specific-purpose borrowing, the amount of interest

to be capitalized is the actual interest expense incurred on that borrowing for the period

less any bank interest earned from depositing the borrowed funds before being used on

the asset or any investment income on the temporary investment of those funds. Where

funds are borrowed under general-purpose borrowings, Ningchang Zhenli determines

the amount of interest to be capitalized on such borrowings by applying a capitalization

rate to the weighted average of the excess of cumulative expenditures on the asset over

the amounts of specific-purpose borrowings. The capitalization rate is the weighted

average of the interest rates applicable to the general-purpose borrowings. During the

capitalization period, exchange differences related to a specific-purpose borrowing

denominated in foreign currency are all capitalized. Exchange differences in connection

with general-purpose borrowings are recognized in profit or loss in the period in which

they are incurred.

15. Income tax

The income tax expenses include current income tax and deferred income tax.

15.1 Current income tax

At the end of each reporting period, current income tax liabilities (or assets) for

the current and prior periods are measured at the amount expected to be paid (or

recovered) according to the requirements of tax laws.

— 126 —


15.2 Deferred tax assets and deferred tax liabilities

For temporary differences between the carrying amounts of certain assets or

liabilities and their tax base, or between the nil carrying amount of those items that

are not recognized as assets or liabilities and their tax base that can be determined

according to tax laws, deferred tax assets and liabilities are recognized using the

balance sheet liability method.

Deferred tax is generally recognized for all temporary differences. Deferred tax

assets for deductible temporary differences are recognized to the extent that it

is probable that taxable profits will be available against which the deductible

temporary differences can be utilized. However, for temporary differences

associated with the initial recognition of goodwill and the initial recognition of an

asset or liability arising from a transaction (not a business combination) that affects

neither the accounting profit nor taxable profits (or deductible losses) at the time of

transaction, no deferred tax asset or liability is recognized.

For deductible losses and tax credits that can be carried forward, deferred tax assets

are recognized to the extent that it is probable that future taxable profits will be

available against which the deductible losses and tax credits can be utilized.

At the end of each reporting period, deferred tax assets and liabilities are measured

at the tax rates, according to tax laws, that are expected to apply in the period in

which the asset is realized or the liability is settled.

Current and deferred tax expenses or income are recognized in profit or loss for

the period, except when they arise from transactions or events that are directly

recognized in other comprehensive income or in shareholders’ equity, in which case

they are recognized in other comprehensive income or in shareholder’s equity; and

when they arise from business combinations, in which case they adjust the carrying

amount of goodwill.

At the end of each reporting period, the carrying amount of deferred tax assets is

reviewed and reduced if it is no longer probable that sufficient taxable profits will

be available in the future to allow the benefit of deferred tax assets to be utilized.

Such reduction in amount is reversed when it becomes probable that sufficient

taxable profits will be available.

— 127 —


15.3 Offset of income tax

When Ningchang Zhenli has a legal right to settle on a net basis and intends

either to settle on a net basis or to realize the assets and settle the liabilities

simultaneously, current tax assets and current tax liabilities are offset and presented

on a net basis.

When Ningchang Zhenli has a legal right to settle current tax assets and liabilities

on a net basis, and deferred tax assets and deferred tax liabilities relate to income

taxes levied by the same taxation authority on either the same taxable entity

or different taxable entities which intend either to settle current tax assets and

liabilities on a net basis or to realize the assets and liabilities simultaneously, in

each future period in which significant amounts of deferred tax assets or liabilities

are expected to be reversed, deferred tax assets and deferred tax liabilities are

offset and presented on a net basis.

16. Operating leases

Leases are classified as finance leases whenever the terms of the lease transfer

substantially all the risks and rewards of ownership to the lessee. All other leases are

classified as operating leases.

Ningchang Zhenli as lessee under operating leases

Operating lease payments are recognized on a straight-line basis over the term of the

relevant lease, and are either included in the cost of related asset or charged to profit or

loss for the period. Initial direct costs incurred are charged to profit or loss for the period.

Contingent rents are charged to profit or loss in the period in which they are actually

incurred.

Ningchang Zhenli as lessor under operating leases

Rental income from operating leases is recognized in profit or loss on a straight-line basis

over the term of the relevant lease. Initial direct costs with more than an insignificant

amount are capitalized when incurred, and are recognized in profit or loss on the same

basis as rental income over the lease term. Other initial direct costs with an insignificant

amount are charged to profit or loss in the period in which they are incurred. Contingent

rents are charged to profit or loss in the period in which they actually arise.

— 128 —


(V) CRITICAL JUDGMENTS IN APPLYING ACCOUNTING POLICY AND KEY

ASSUMPTIONS AND UNCERTAINTY ADOPTED IN ACCOUNTING ESTIMATES

In the application of the Ningchang Zhenli’s accounting policies, which are described in Note

IV, Ningchang Zhenli is required to make judgements, estimates and assumptions about the

carrying amounts of items in the Financial Information that cannot be measured accurately,

due to the internal uncertainty of the operating activities. These judgements, estimates and

assumptions are based on historical experiences of Ningchang Zhenli’s management as well as

other factors that are considered to be relevant. Actual results may differ from these estimates.

The aforementioned judgements, estimates and assumptions are reviewed regularly on a going

concern basis. The effect of a change in accounting estimate is recognized in the period of the

change if the change affects that period only; or recognized in the period of the change and

future periods, if the change affects that period and future periods.

— Key assumptions and uncertainty adopted in accounting estimates

Amortization of toll road operation rights

Amortisation of the toll road operation rights are calculated to write off their cost,

commencing from the date of commencement of commercial operation of the toll roads,

based on the ratio of actual traffic volume compared to the total expected traffic volume

of the toll roads.

The management exercises their judgment in estimating the total expected traffic volume

of the toll roads during the operating period. When there is large difference between

actual and expected traffic volume, the management will exercises their judgment in the

accuracy of the expected traffic volume and adjust the future amortization per traffic

volume. Jiangsu Government Office issued SuZhengBan (2012) No. 128 “ Notice of

toll road operation periods re-confirmation “ in July 2012. The toll period of Ningchang

expressway and Zhenli expressway were changed to “September 2007- September 2032”,

and the toll road operation period changed from 30 years to 25 years correspondingly.

The management makes a reassessment of predicted traffic volumes according to the

residual toll collection periods and adjusts the provisions of amortization amounts for

the standard traffic volumes of each road in accordance with the assessment results. The

adjustments please refer to Note VI 1.1.

— 129 —


Impairment of toll road operation rights

Determining whether toll road operation rights are impaired requires an estimation of the

recoverable amount.

In measuring the recoverable amount of the toll road operation rights, Ningchang Zhenli

has calculated the value in use based on the following key assumptions: the current

and expected future traffic volume, current and expected future toll fee level, length of

operating rights, maintenance costs and required rate of return (the “Relevant Factors”).

In arriving at the recoverable amount of the toll road operation rights, the management

exercised their judgment with reference to these Relevant Factors in estimating the

recoverable amounts of the toll road operation rights. As a result, the management

considered that the recoverable amounts are above their carrying amounts and no

impairment was made accordingly. The management will pay close attention to the

relevant situation. If any indication shows that adjustments of relevant accounting

estimate assumptions need to be made, the management will adjust the carrying amounts

of toll road operation rights in the period of change in accounting estimate.

Deferred income tax assets

As at 30 September 2014, deferred tax for the deductible tax losses of

RMB1,723,169,395.37 (31 December 2013: RMB1,901,857,223.95; 31 December 2012:

RMB1,999,956,476.78; 31 December 2011: RMB1,674,354,903.74) and deductible

temporary differences RMB38,232,170.67 (31 December 2013: RMB38,732,033.49;

31 December 2012: RMB39,035,978.39; 31 December 2011: RMB39,625,670.50) are

not recognized, because Ningchang Zhenli could not determine whether it can obtain

adequate taxable income to offset the deductible tax losses and deductible temporary

differences in the future. In case it is probable that taxable profits will be available

against the deductible losses and temporary difference, the carrying amounts of deferred

tax assets will be adjusted and the adjustment will be recognized to profit or loss in the

corresponding period.

— 130 —


(VI) CHANGES IN SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING

ESTIMATES

1. Changes in accounting estimates

1.1 Changes in toll road operation period

Unit:RMB

The contents and reasons of

change in accounting estimate

Affected

financial

statement

items

Affected

amount-Year

2012

Affected

amount-Year

2013

Affected

amount-From

1 January

2014 to 30

September

2014

Jiangsu Government Office issued

SuZhengBan (2012) No. 128

“Notice of toll road operation

periods re-confirmation” in

July 2012. The toll period

of Ningchang expressway

and Zhenli expressway were

changed to “September 2007-

September 2032”, and the toll

road operation period changed

from 30 years to 25 years

correspondingly. Ningchang

Zhenli applied prospectively,

made a reassessment of

predicted traffic volumes

according to the residual toll

collection periods and adjusted

the provisions of amortization

amounts for the standard

traffic volumes of each road in

accordance with the assessment

results since July 2012.

Intangible

assets

Decrease

31,058,259.69

Decrease

56,811,082.86

Decrease

61,745,015.65

Operating

cost

Increase

31,058,259.69

Increase

56,811,082.86

Increase

61,745,015.65

— 131 —


1.2 Changes in depreciation year

According to the progress of Ningchang Zhenli’s modernization and the judgments

on the future usage of relevant ancillary facilities of expressway, the original

categories of fixed assets of Ningchang Zhenli cannot satisfy the requirements

of assets management, and the expected useful life and ratio of residual value

of certain categories of fixed assets also changed. Ningchang Zhenli adopted

prospective application method to make adjustments to the categories, use life and

residuals rate of certain fixed assets since 1 January 2014. Impact of the changes in

accounting estimates upon the items in the financial statements for the periods as

follows:

The category, depreciation period, residual rate and depreciation rate of Ningchang

Zhenli’s fixed assets are as follows before the change in accounting estimates:

Category

Depreciation

period

Residual

value rate

Annual

depreciation

rate

(years) (%) (%)

Toll road structures 30 3 3.2


Communication and


Toll and ancillary

equipment 8 3 12.1


Other machine and

equipment 8-10 3 9.7–12.1

— 132 —


The category, depreciation period, residual rate and depreciation rate of Ningchang

Zhenli’s fixed assets are as follows after the change in accounting estimates:

Category

Depreciation

period

Residual

value rate

Annual

depreciation

rate

(years) (%) (%)

Toll road structures 10-30 0 3.33-10


Communication and


Toll and ancillary

equipment 8 3 12.1





The impact of the changes in accounting estimate on the Financial Information:

Unit: RMB

The impact on the Financial Information

30 September 2014

and From 1 January

2014 to 30 September

2014

Decrease of fixed assets 2,433,643.19

Increase of operating costs 2,433,643.19

Ningchang Zhenli’s management believes that the changes in accounting estimates

above will not have a significant impact on Ningchang Zhenli’s financial position

and operating results.

— 133 —


(VII) TAXES

Main categories of taxes and tax rates

Categories of taxes Basis of tax computation Tax rate

Value Added

Tax (“VAT”)

Output VAT less deductible input VAT 17%

Business Tax Toll income

Obstacle remove and maintenance income

Rental income

Food and beverage income

3%

5%

5%

5%

City maintenance and

construction tax

Actual paid business tax and VAT 5%-7%

Education surcharge Actual paid business tax and VAT 5%

Enterprise income tax Taxable income 25%

(VIII) NOTES TO ITEMS IN THE FINANCIAL INFORMATION

1. Cash and bank balances

Unit: RMB

Item

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Cash 76,058.08 38,211.85 35,770.76 34,302.54

Bank balances 107,994,473.18 90,281,172.25 105,746,533.25 21,080,159.35

Total 108,070,531.26 90,319,384.10 105,782,304.01 21,114,461.89

— 134 —


Deposits in related parties:

Unit: RMB

Item

30 September

2014

31 December

2013

31 December

2012

31 December

2011


Holdings Group Finance

Company Limited (Note) 83,613,712.47 75,577,638.92 77,083,965.95 —

Note: Jiangsu Communications Holdings Group Finance Company Limited (“Group Finance Company”) is a subsidiary of Communications Holdings, as well as a non-bank financial institution licenced by China Bank Regulatory Commission.


(1) Disclosure of accounts receivable by categories:

Unit: RMB

30 September 2014 31 December 2013

Category

Carrying

amount Rate

Bad debt

provision Rate

Carrying

amount Rate

Bad debt

provision Rate

(%) (%) (%) (%)


individually significant 8,431,148.69 45 — — — — — —

Accounts receivable for which bad

debt provision has been

assessed by portfolios — — — — 1,104,000.00 10 55,200.00 6



but for which bad debt provision

has been assessed individually 10,352,134.00 55 1,755,180.00 100 9,808,144.61 90 849,990.00 94

Total 18,783,282.69 100 1,755,180.00 100 10,912,144.61 100 905,190.00 100

— 135 —


31 December 2012 31 December 2011

Category

Carrying

amount Rate

Bad debt

provision Rate

Carrying

amount Rate

Bad debt

provision Rate

(%) (%) (%) (%)


individually significant — — — — 7,690,223.00 58 — —

Accounts receivable for which bad


assessed by portfolios 2,789,980.00 24 139,499.00 100 2,179,980.00 17 — —


not individually significant but

for which bad debt provision has

been assessed individually 8,967,305.57 76 — — 3,285,705.78 25 — —

Total 11,757,285.57 100 139,499.00 100 13,155,908.78 100 — —

Majority toll road and ancillary services income are settled by cash. The accounts

receivable mainly represent the receivables due from other toll operation companies

by toll network internal income reallocation.

Explanations of categories of accounts receivable:

An accounts receivable that exceeds RMB2,500,000.00 is deemed as an

individually significant receivable by Ningchang Zhenli.

— 136 —


(2) Aging analysis of accounts receivables is as follows:

Unit: RMB


Aging

Carrying

amount Rate

Bad debt

provision Book value

Carrying

amount Rate

Bad debt


(%) (%)

Within 1 year 17,083,302.69 91 55,200.00 17,028,102.69 9,212,164.61 84 55,200.00 9,156,964.61

More than 1 year but

not exceed 2 years — — — — 1,699,980.00 16 849,990.00 849,990.00

More than 2 years but

not exceed 3 years 1,699,980.00 9 1,699,980.00 — — — — —

Total 18,783,282.69 100 1,755,180.00 17,028,102.69 10,912,144.61 100 905,190.00 10,006,954.61


Aging

Carrying

amount Rate

Bad debt


Carrying

amount Rate

Bad debt


(%) (%)

Within 1 year 11,757,285.57 100 139,499.00 11,617,786.57 12,355,908.78 94 — 12,355,908.78


not exceed 2 years — — — — 800,000.00 6 — 800,000.00


not exceed 3 years — — — — — — — —

Total 11,757,285.57 100 139,499.00 11,617,786.57 13,155,908.78 100 — 13,155,908.78

— 137 —


Accounts receivable portfolios for which bad debt provision has been assessed

using aging analysis approach:

Unit: RMB


Portfolios Title

Carrying

amount

Bad debt

provision

Carrying

amount

Bad debt

provision

Within 1 year — — 1,104,000.00 55,200.00


not exceed 2 years — — — —



More than 3 years — — — —

Total — — 1,104,000.00 55,200.00


Portfolios Title

Carrying

amount

Bad debt

provision

Carrying

amount

Bad debt

provision

Within 1 year 2,789,980.00 139,499.00 1,379,980.00 —


not exceed 2 years — — 800,000.00 —



More than 3 years — — — —

Total 2,789,980.00 139,499.00 2,179,980.00 —

(3) There is no accounts receivable due from shareholders holding at least 5% of

Ningchang Zhenli’s shares with voting power in the reporting period.

— 138 —


(4) Top five entities with the largest balances of accounts receivable:

30 September 2014

Unit: RMB

Name of entity

Relationship

with

Ningchang

Zhenli Amount Aging

Proportion of

the amount

to the total

accounts

receivable

(%)

Jiangsu Expressway Network

Operation and Management

Co., Ltd.

(“Network Operation Company”)

Same ultimate

shareholder

4,376,244.69 Within 1 year 23

Jiangsu Ninghang Expressway

Co., Ltd.

(“Ninghang Expressway”)

Same ultimate

shareholder

4,054,904.00 Within 1 year 22

Jiangsu Expressway Petroleum

Development Co., Ltd.

(“Expressway Petroleum

Company”)

Same ultimate

shareholder

1,880,000.00 Within 1 year 10

Nanjing Renjie Advertising

Co., Ltd.

(“Renjie Advertising”)

Third party 1,699,980.00 More than

2 years but

not exceed

3 years

9

Jiangsu Jinghu Expressway

Co., Ltd.

(“Jinghu Expressway”)

Same ultimate

shareholder

1,103,191.00 Within 1 year 6

Total 13,114,319.69 70

— 139 —


31 December 2013

Unit: RMB

Name of entity

Relationship

with

Ningchang

Zhenli Amount Aging

Proportion of

the amount

to the total

accounts

receivable

(%)

Ninghang Expressway Same ultimate

shareholder

2,019,174.00 Within 1 year 19

Renjie Advertising Third party 1,699,980.00 More than

1 years but

not exceed

2 years

16

Expressway Petroleum Company Same ultimate

shareholder

1,252,900.00 Within 1 year 11

Jinghu Expressway Same ultimate

shareholder

1,141,749.00 Within 1 year 10

Network Operation Company Same ultimate

shareholder

999,709.61 Within 1 year 9

Total 7,113,512.61 65

— 140 —


31 December 2012

Unit: RMB

Name of entity

Relationship

with

Ningchang

Zhenli Amount Aging

Proportion of

the amount

to the total

accounts

receivable

(%)

Renjie Advertising Third party 2,099,980.00 Within 1 year 18


shareholder

1,952,022.51 Within 1 year 17

Jinghu Expressway Same ultimate

shareholder

1,639,979.00 Within 1 year 14


shareholder

1,388,300.00 Within 1 year 12


shareholder

1,182,800.00 Within 1 year 10

Total 8,263,081.51 71

— 141 —


31 December 2011

Unit: RMB

Name of entity

Relationship

with

Ningchang

Zhenli Amount Aging

Proportion of

the amount

to the total

accounts

receivable

(%)


shareholder

4,488,946.00 Within 1 year 34

Runyang Bridge Same ultimate

shareholder

3,201,277.00 Within 1 year 24

Renjie Advertising Third party 2,179,980.00 Within 1 year 17


shareholder

1,215,300.00 Within 1 year 9


shareholder

1,075,977.78 Within 1 year 8

Total 12,161,480.78 92

(5) Receivables due from related parties

Unit: RMB


Name of entity

Relationship with

Ningchang Zhenli Amount

Proportion of

the amount

to the total

accounts

receivable Amount

Proportion of

the amount

to the total

accounts

receivable

(%) (%)

Expressway Petroleum

Company

Same ultimate

shareholder

1,880,000.00 10 1,252,900.00 11

Total 1,880,000.00 10 1,252,900.00 11

— 142 —



Name of entity

Relationship with

Ningchang Zhenli Amount

Proportion of

the amount

to the total

accounts

receivable Amount

Proportion of

the amount

to the total

accounts

receivable

(%) (%)


Company

Same ultimate

shareholder

1,182,800.00 10 1,215,300.00 9

Total 1,182,800.00 10 1,215,300.00 9

Note: At 30 September 2014, 31 December 2013, 31 December 2012 and 31 December 2011, besides the accounts receivable of gas station lease from Expressway Petroleum Company stated above, there are split toll road fee receivables from Network Operation Company, Ninghang Expressway, Jinghu Expressway and other toll operation companies within Jiangsu toll road network which amounted to RMB15,125,110.69, RMB6,879,350.61, RMB7,740,439.51 and RMB9,679,138.78 respectively. The ultimate shareholder of these Toll Road Network Companies is Communications Holdings, except for which Ningchang Zhenli has no other control, joint control or significant influence relationship with them.

— 143 —


3. Prepayments

Disclosure of prepayments by aging:

Unit: RMB

30 September 2014 31 December 2013 31 December 2012 31 December 2011

Aging Amount Rate Amount Rate Amount Rate Amount Rate

(%) (%) (%) (%)

Within 1 year 424,067.73 81 485,756.37 82 380,378.24 81 606,085.32 45


not exceed 2 years 8,000.00 2 20,000.00 3 40,000.00 9 200,000.00 15

More than 2 years

but not exceed

3 years — — 40,000.00 7 — — 550,000.00 40

More than 3 years 90,000.00 17 50,000.00 8 50,000.00 10 — —

Total 522,067.73 100 595,756.37 100 470,378.24 100 1,356,085.32 100

— 144 —


4. Other receivables

(1) Disclosure of other receivables by categories:

Unit: RMB


Item

Carrying

amount Rate

Bad debt

provision Rate

Carrying

amount Rate

Bad debt

provision Rate

(%) (%) (%) (%)

Other receivables that are

individually significant — — — — — — — —

Other receivables for which bad


assessed by portfolios 887,686.78 55 6,726.20 100 806,979.09 52 6,726.20 100

Other receivables that are not

individually significant but for

which bad debt provision

has been assessed individually 715,600.00 45 — — 746,293.00 48 — —

Total 1,603,286.78 100 6,726.20 100 1,553,272.09 100 6,726.20 100


Item

Carrying

amount Rate

Bad debt

provision Rate

Carrying

amount Rate

Bad debt

provision Rate

(%) (%) (%) (%)

Other receivables that are

individually significant 1,396,572.51 63 — — 48,574,933.01 99 — —

Other receivables for which bad


assessed by portfolios 131,974.91 6 — — 174,607.31 — — —

Other receivables that are not

individually significant but for

which bad debt provision has

been assessed individually 696,293.00 31 — — 451,035.00 1 — —

Total 2,224,840.42 100 — — 49,200,575.32 100 — —

— 145 —


Explanations of categories of other receivables:

Other receivables that exceed RMB750,000.00 are deemed as an individually

significant receivable by Ningchang Zhenli.

Other receivables of Ningchang Zhenli mainly include compensation from

damaged road and petty cash etc. The balance at 31 December 2011 includes

RMB45,978,741.51 deposited in the financial settlement center of Communications

Holdings.

(2) Aging analysis of other receivables is as follows:

Unit: RMB


AgingCarrying

amount RateBad debt provision Book value

Carrying amount Rate

Bad debt provision Book value

(%) (%)

Within 1 year 1,266,348.29 79 — 1,266,348.29 1,080,684.60 70 6,726.20 1,073,958.40


not exceed 2 years 252,944.00 16 6,726.20 246,217.80 357,158.00 23 — 357,158.00


not exceed 3 years 11,800.00 — — 11,800.00 43,435.00 2 — 43,435.00

More than 3 years 72,194.49 5 — 72,194.49 71,994.49 5 — 71,994.49

Total 1,603,286.78 100 6,726.20 1,596,560.58 1,553,272.09 100 6,726.20 1,546,545.89


AgingCarrying

amount RateBad debt provision Book value

Carrying amount Rate


(%) (%)

Within 1 year 2,072,810.93 93 — 2,072,810.93 48,193,743.63 98 — 48,193,743.63


not exceed 2 years 75,035.00 3 — 75,035.00 775,977.20 2 — 775,977.20


not exceed 3 years 11,140.00 1 — 11,140.00 230,854.49 — — 230,854.49

More than 3 years 65,854.49 3 — 65,854.49 — — — —

Total 2,224,840.42 100 — 2,224,840.42 49,200,575.32 100 — 49,200,575.32

— 146 —


(3) Other receivables portfolios for which bad debt provision has been assessed using

aging analysis approach:

Unit: RMB


Portfolios Title

Carrying

amount

Bad debt

provision

Carrying

amount

Bad debt

provision

Within 1 year 810,308.29 6,726.20 744,124.60 6,726.20


not exceed 2 years 14,524.00 — — —



More than 3 years 62,854.49 — 62,854.49 —

Total 887,686.78 6,726.20 806,979.09 6,726.20


Portfolios Title

Carrying

amount

Bad debt

provision

Carrying

amount

Bad debt

provision

Within 1 year 39,120.42 — 111,752.82 —


not exceed 2 years 30,000.00 — — —


not exceed 3 years — — 62,854.49 —

More than 3 years 62,854.49 — — —

Total 131,974.91 — 174,607.31 —

— 147 —


5. Inventories

Unit: RMB


Item

Carrying

amount Provision Book value

Carrying


Raw materials 112,287.43 — 112,287.43 233,199.51 — 233,199.51

Turnover

materials 1,598.00 — 1,598.00 2,928.00 — 2,928.00

Merchandise 495,425.59 — 495,425.59 443,541.28 — 443,541.28

Total 609,311.02 — 609,311.02 679,668.79 — 679,668.79


Item

Carrying


Carrying


Raw materials 320,058.15 — 320,058.15 232,945.14 — 232,945.14

Merchandise 441,736.59 — 441,736.59 1,013,889.08 — 1,013,889.08

Total 761,794.74 — 761,794.74 1,246,834.22 — 1,246,834.22

— 148 —


6. Available-for-sale financial assets

Details of available-for-sale financial assets as follows:

Unit: RMB

Item

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Available-for-sale

equity instruments 11,230,000.00 11,230,000.00 8,150,000.00 8,150,000.00

30 September 2014 and 31 December 2013

Unit: RMB

Classification

Available-for-sale

equity instruments

Cost of equity instruments 11,230,000.00

Closing fair value N/A

Accumulated fair value change that have

been charged in the other comprehensive income —

Impairment amount —

— 149 —


31 December 2012 and 31 December 2011

Unit: RMB

Classification

Available-for-sale

equity instruments



Accumulated fair value change that have

been charged in the other comprehensive income —


At 30 September 2014 and 31 December 2013, the available-for-sale financial assets

of Ningchang Zhenli include: the investment amounting RMB5,230,000.00 on Network

Operation Company which is established in China and a non-listed company, and the

investment of which is 3.62%; as well as the investment amounting RMB6,000,000.00 on

Jiangsu Sundian Engineering Co., Ltd. (“Sundian”) at the investment ratio of 7.5%.

At 31 December 2012 and 31 December 2011, the available-for-sale financial assets of

Ningchang Zhenli include: the investment amounting RMB2,150,000.00 on Network


investment of which is 3.9%; the investment amounting RMB6,000,000.00 on Sundian at

the investment ratio of 7.5%.

For the above available-for-sale financial assets, since they don’t have a quoted market

price in an active market and the fair value could not be reliably measured, nor did they

have any significant influence over the investee companies, Ningchang Zhenli measures

them at cost less impairment.

— 150 —


7.

Fix

ed a

sset

s

(1)

Fix

ed a

sset

s

Unit:

RMB

Item

1 Jan

uary

2011

Incre

ase

in the

year

Decre

ase

in the

year

31 D

ecemb

er

2011

Incre

ase

in the

year

Decre

ase

in the

year

31 D

ecemb

er

2012

Incre

ase

in the

year

Decre

ase

in the

year

31 D

ecemb

er

2013

Incre

ase

in the

perio

d

Decre

ase

in the

perio

d

Categ

ory

adjus

tmen

t

30 Se

ptemb

er

2014

1. To

tal or

igina

l car

rying

amou

nt1,0

04,29

3,986

.5713

,985,8

44.57

—1,0

18,27

9,831

.148,0

50,14

9.67

-7,99

3,336

.901,0

18,33

6,643

.917,2

72,36

4.13

-4,55

7,992

.611,0

21,05

1,015

.4328

,772,6

64.88

-2,25

0,861

.05—

1,047

,572,8

19.26

Inc

luding

: To

ll roa

d stru

ctures

524,6

38,36

9.78

3,837

,519.4

0—

528,4

75,88

9.18

618,5

03.88

—52

9,094

,393.0

610

4,775

.13-3,

830,7

89.61

525,3

68,37

8.58

21,25

2,372

.35—

-357,3

08.94

546,2

63,44

1.99

Safet

y Equ

ipmen

t22

7,933

,469.6

21,4

14,67

9.17

—22

9,348

,148.7

946

,400.0

0—

229,3

94,54

8.79

495,7

70.00

—22

9,890

,318.7

9—

——

229,8

90,31

8.79

Comm

unica

tion a

nd su

rveilla

nce e

quipm

ent

75,14

4,624

.921,1

77,70

0.00

—76

,322,3

24.92

338,9

00.00

-2,57

9,544

.0474

,081,6

80.88

974,1

22.00

—75

,055,8

02.88

1,061

,200.0

0—

4,554

,265.9

680

,671,2

68.84

Toll a

nd an

cillar

y equ

ipmen

t48

,118,3

34.05

5,821

,993.0

0—

53,94

0,327

.053,8

20,34

6.06

-2,22

8,987

.1355

,531,6

85.98

1,120

,630.0

0—

56,65

2,315

.982,1

71,93

8.00

-2,21

6,195

.72—

56,60

8,058

.26

Mach

ine an

d equ

ipmen

t11

7,521

,968.2

01,7

33,95

3.00

—11

9,255

,921.2

02,1

28,83

4.73

-2,56

2,130

.7311

8,822

,625.2

04,0

23,69

6.00

—13

8,558

.0012

2,707

,763.2

02,3

41,74

0.00

—-23

,620,9

66.35

101,4

28,53

6.85

Electr

onic

equip

ment

——

——

——

——

——

944,8

27.61

—9,2

77,61

5.40

10,22

2,443

.01

Motor

vehic

les10

,937,2

20.00

——

10,93

7,220

.001,0

97,16

5.00

-622,6

75.00

11,41

1,710

.0055

3,371

.00—

588,6

45.00

11,37

6,436

.0076

5,194

.88—

—12

,141,6

30.88

Furni

ture a

nd ot

hers

——

——

——

——

——

235,3

92.04

-34,66

5.33

10,14

6,393

.9310

,347,1

20.64

2. To

tal ac

cumu

lated

depr

eciati

on25

1,204

,300.4

862

,656,2

85.32

—31

3,860

,585.8

085

,355,6

40.34

-4,48

5,647

.5139

4,730

,578.6

377

,946,9

23.28

-1,89

1,977

.0347

0,785

,524.8

852

,122,3

46.48

-1,94

4,302

.59—

520,9

63,56

8.77

Inc

luding

: To

ll roa

d stru

ctures

66,29

3,856

.5426

,841,8

41.20

—93

,135,6

97.74

33,74

6,918

.47—

126,8

82,61

6.21

25,64

1,531

.72-1,

323,3

88.56

151,2

00,75

9.37

15,33

9,443

.11—

-176,1

83.22

166,3

64,01

9.26

Safet

y Equ

ipmen

t73

,014,0

99.36

21,67

1,439

.78—

94,68

5,539

.1421

,984,6

61.26

—11

6,670

,200.4

022

,268,7

69.28

—13

8,938

,969.6

816

,724,4

84.81

——

155,6

63,45

4.49

Comm

unica

tion a

nd su

rveilla

nce e

quipm

ent

39,16

2,320

.023,2

25,70

3.66

—42

,388,0

23.68

5,946

,057.0

0-1,

392,3

96.93

46,94

1,683

.759,1

67,07

4.61

—56

,108,7

58.36

6,150

,589.9

4—

4,414

,689.1

866

,674,0

37.48

Toll a

nd an

cillar

y equ

ipmen

t25

,919,0

00.34

2,279

,745.9

4—

28,19

8,746

.284,4

57,16

8.99

-1,98

1,217

.7030

,674,6

97.57

7,075

,369.0

9—

37,75

0,066

.664,7

18,76

7.09

-1,91

0,677

.23—

40,55

8,156

.52

Mach

ine an

d equ

ipmen

t42

,612,9

74.24

7,300

,000.8

4—

49,91

2,975

.0817

,854,6

12.99

-734,7

55.04

67,03

2,833

.0312

,400,3

95.15

-134,4

01.26

79,29

8,826

.926,7

47,91

9.60

—-20

,286,8

37.59

65,75

9,908

.93

Electr

onic

equip

ment

——

——

——

——

——

1,143

,949.2

9—

7,190

,482.5

88,3

34,43

1.87

Motor

vehic

les4,2

02,04

9.98

1,337

,553.9

0—

5,539

,603.8

81,3

66,22

1.63

-377,2

77.84

6,528

,547.6

71,3

93,78

3.43

-434,1

87.21

7,488

,143.8

91,0

43,89

2.13

——

8,532

,036.0

2

Furni

ture a

nd ot

hers

——

——

——

——

——

253,3

00.51

-33,62

5.36

8,857

,849.0

59,0

77,52

4.20

— 151 —


Unit:

RMB

Item

1 Jan

uary

2011

Incre

ase

in the

year

Decre

ase

in the

year

31 D

ecemb

er

2011

Incre

ase

in the

year

Decre

ase

in the

year

31 D

ecemb

er

2012

Incre

ase

in the

year

Decre

ase

in the

year

31 D

ecemb

er

2013

Incre

ase

in the

perio

d

Decre

ase

in the

perio

d

Categ

ory

adjus

tmen

t

30 Se

ptemb

er

2014

3. To

tal ne

t boo

k valu

e of f

ixed a

ssets

753,0

89,68

6.09

704,4

19,24

5.34

623,6

06,06

5.28

550,2

65,49

0.55

526,6

09,25

0.49

Inc

luding

: To

ll roa

d stru

ctures

458,3

44,51

3.24

435,3

40,19

1.44

402,2

11,77

6.85

374,1

67,61

9.21

379,8

99,42

2.73

Safet

y Equ

ipmen

t15

4,919

,370.2

613

4,662

,609.6

511

2,724

,348.3

990

,951,3

49.11

74,22

6,864

.30

Comm

unica

tion a

nd su

rveilla

nce e

quipm

ent

35,98

2,304

.9033

,934,3

01.24

27,13

9,997

.1318

,947,0

44.52

13,99

7,231

.36

Toll a

nd an

cillar

y equ

ipmen

t22

,199,3

33.71

25,74

1,580

.7724

,856,9

88.41

18,90

2,249

.3216

,049,9

01.74

Mach

ine an

d equ

ipmen

t74

,908,9

93.96

69,34

2,946

.1251

,789,7

92.17

43,40

8,936

.2835

,668,6

27.92

Electr

onic

equip

ment

——

——

1,888

,011.1

4

Motor

vehic

les6,7

35,17

0.02

5,397

,616.1

24,8

83,16

2.33

3,888

,292.1

13,6

09,59

4.86

Furni

ture a

nd ot

hers

——

——

1,269

,596.4

4

4. To

tal pr

ovisi

on fo

r imp

airme

nt los

ses—

——

——

——

——

——

——

—

Inc

luding

: To

ll roa

d stru

ctures

——

——

——

——

——

——

——

Safet

y Equ

ipmen

t—

——

——

——

——

——

——

—

Comm

unica

tion a

nd

sur

veilla

nce e

quipm

ent

——

——

——

——

——

——

——

Toll a

nd an

cillar

y equ

ipmen

t—

——

——

——

——

——

——

—

Mach

ine an

d equ

ipmen

t—

——

——

——

——

——

——

—

Electr

onic

equip

ment

——

——

——

——

——

——

——

Motor

vehic

les—

——

——

——

——

——

——

—

Furni

ture a

nd ot

hers

——

——

——

——

——

——

——

5. To

tal ca

rrying

amou

nt

of fix

ed as

sets

753,0

89,68

6.09

704,4

19,24

5.34

623,6

06,06

5.28

550,2

65,49

0.55

526,6

09,25

0.49

Inc

luding

: To

ll roa

d stru

ctures

458,3

44,51

3.24

435,3

40,19

1.44

402,2

11,77

6.85

374,1

67,61

9.21

379,8

99,42

2.73

Safet

y Equ

ipmen

t15

4,919

,370.2

613

4,662

,609.6

511

2,724

,348.3

990

,951,3

49.11

74,22

6,864

.30

Comm

unica

tion a

nd su

rveilla

nce e

quipm

ent

35,98

2,304

.9033

,934,3

01.24

27,13

9,997

.1318

,947,0

44.52

13,99

7,231

.36

Toll a

nd an

cillar

y equ

ipmen

t22

,199,3

33.71

25,74

1,580

.7724

,856,9

88.41

18,90

2,249

.3216

,049,9

01.74

Mach

ine an

d equ

ipmen

t74

,908,9

93.96

69,34

2,946

.1251

,789,7

92.17

43,40

8,936

.2835

,668,6

27.92

Electr

onic

equip

ment

——

——

1,888

,011.1

4

Motor

vehic

les6,7

35,17

0.02

5,397

,616.1

24,8

83,16

2.33

3,888

,292.1

13,6

09,59

4.86

Furni

ture a

nd ot

hers

——

——

1,269

,596.4

4

— 152 —


(2) Explanation of movements of fixed assets:

During the period from 1 January 2014 to 30 September 2014, the increase

in the original carrying amount for the period consists of acquisitions of

RMB10,029,283.48, an increase of RMB18,743,381.40 transferred from

construction in progress, while the decrease in the original carrying amount for

the period consists of a decrease of RMB2,250,861.05 on disposals. The increase

in accumulated depreciation for the period consists of charge for the period of

RMB52,122,346.48, while the decrease in accumulated depreciation for the period

consists of RMB1,944,302.59 on disposals.

During the year of 2013, the increase in the original carrying amount for the year

consists of acquisitions of RMB7,272,364.13, while the decrease in the original

carrying amount for the year consists of a decrease of RMB4,557,992.61 on

disposals. The increase in accumulated depreciation for the year consists of charge

for the year of RMB77,946,923.28, while the decrease in accumulated depreciation

for the year consists of RMB1,891,977.03 on disposals.


consists of acquisitions of RMB8,050,149.67, while the decrease in the original




for the year consists of RMB4,485,647.51 on disposals.


consists of acquisitions of RMB11,760,831.18, an increase of RMB2,225,013.39

transferred from construction in progress. The increase in accumulated depreciation

for the year consists of charge for the year of RMB62,656,285.32.

(3) At 30 September 2014, 31 December 2013, 31 December 2012 and 31 December

2011, the gas station property of carrying amount of RMB1,632,907.24,

RMB1,700,945.12, RMB1,791,662.30 and RMB1,315,397.40 is used for

Expressway Petroleum Company’s operating lease.

— 153 —



(1) Details of construction in progress are as follows:

Unit: RMB


Item

Carrying


Carrying


Carrying


Carrying


Gehu interoperability

project — — — — — — — — — 50,000,000.00 — 50,000,000.00

New office building — — — — — — 373,540.00 — 373,540.00 — — —

Reconstruction of

the dormitory — — — 5,249,742.82 — 5,249,742.82 — — — — — —

Others — — — 5,000.00 — 5,000.00 — — — — — —

Total — — — 5,254,742.82 — 5,254,742.82 373,540.00 — 373,540.00 50,000,000.00 — 50,000,000.00

(2) Changes in construction in progress:

Unit: RMB

Item

1 January

2011

Increase

in the year

Transfer to

fix assets

Accumulated

Capitalized

Interest

31 December

2011

Increase

in the year

Transfer to

Intangible

assets

Accumulated

Capitalized

Interest

31 December

2012

Increase

in the year

Other

Decrease

Accumulated

Capitalized

Interest

31 December

2013

Increase

in the period

Transfer to

fixed assets

Accumulated

Capitalized

Interest

30 September

2014

Gehu interoperability project — 50,000,000.00 — — 50,000,000.00 9,990,000.00 -59,990,000.00 — — — — — — — — — —

New office building — — — — — 373,540.00 — — 373,540.00 32,499.00 -406,039.00 — — — — — —

Reconstruction of

the dormitory 1,209,925.24 646,300.00 -1,856,225.24 — — — — — — 5,249,742.82 — — 5,249,742.82 12,598,016.58 -17,847,759.40 — —

Others 318,788.15 50,000.00 -368,788.15 — — — — — — 5,000.00 — — 5,000.00 890,622.00 -895,622.00 — —

Total 1,528,713.39 50,696,300.00 -2,225,013.39 — 50,000,000.00 10,363,540.00 -59,990,000.00 — 373,540.00 5,287,241.82 -406,039.00 — 5,254,742.82 13,488,638.58 -18,743,381.40 — —

Ningchang Zhenli did not note any indicators of impairment; therefore there is no

provision for impairment of construction in progress.

— 154 —



Unit: RMB

Item

1 January

2011

Increase

in the year

31 December

2011

Increase

in the year

31 December

2012

Increase

in the year

31 December

2013

Increase

in the period

30 September

2014

1. Total original

carrying amount 7,866,158,069.70 — 7,866,158,069.70 59,990,000.00 7,926,148,069.70 — 7,926,148,069.70 — 7,926,148,069.70

Toll road operation rights 7,866,158,069.70 — 7,866,158,069.70 59,990,000.00 7,926,148,069.70 — 7,926,148,069.70 — 7,926,148,069.70

2. Total accumulated

amortization 267,660,319.24 108,750,639.06 376,410,958.30 147,085,973.64 523,496,931.94 184,508,838.87 708,005,770.81 199,780,614.86 907,786,385.67

Toll road operation rights 267,660,319.24 108,750,639.06 376,410,958.30 147,085,973.64 523,496,931.94 184,508,838.87 708,005,770.81 199,780,614.86 907,786,385.67

3. Total net book value of

intangible assets 7,598,497,750.46 7,489,747,111.40 7,402,651,137.76 7,218,142,298.89 7,018,361,684.03

Toll road operation rights 7,598,497,750.46 7,489,747,111.40 7,402,651,137.76 7,218,142,298.89 7,018,361,684.03

4. Total provision for

impairment — — — — — — — — —

Toll road operation rights — — — — — — — — —

5. Total carrying amount of

intangible assets 7,598,497,750.46 7,489,747,111.40 7,402,651,137.76 7,218,142,298.89 7,018,361,684.03

Toll road operation rights 7,598,497,750.46 7,489,747,111.40 7,402,651,137.76 7,218,142,298.89 7,018,361,684.03

— 155 —


Description of intangible assets:

Note 1:

At 30 September 2014, the toll road operation rights of Ningchang expressway with the net book value RMB4,367,737,944.74 are pledged to secure bank loan amounting to RMB1,270,000,000.00. The amortization of such toll road operation rights during the period was RMB146,080,407.18; the toll road operation rights of Zhenli Expressway with the net book value RMB2,650,623,739.29 are pledged to secure bank loan amounting to RMB693,000,000.00. The amortization of such toll road operation rights during the period was RMB53,700,207.68.

At 31 December 2013, the toll road operation rights of Ningchang expressway with the net book value RMB4,513,818,351.92 are pledged to secure bank loan amounting to RMB1,330,000,000.00. The amortization of such toll road operation rights during the period was RMB116,542,220.73; the toll road operation rights of Zhenli Expressway with the net book value RMB2,704,323,946.97 are pledged to secure bank loan amounting to RMB781,000,000.00. The amortization of such toll road operation rights during the period was RMB67,966,618.14.

At 31 December 2012, the toll road operation rights of Ningchang expressway with the net book value RMB4,630,360,572.65 are pledged to secure bank loan amounting to RMB1,460,000,000.00. The amortization of such toll road operation rights during the period was RMB83,316,799.34; the toll road operation rights of Zhenli Expressway with the net book value RMB2,772,290,565.11 are pledged to secure bank loan amounting to RMB869,000,000.00. The amortization of such toll road operation rights during the period was RMB63,769,174.30.

At 31 December 2011, the toll road operation rights of Ningchang expressway with the net book value RMB4,653,687,371.99 are pledged to secure bank loan amounting to RMB1,520,000,000.00. The amortization of such toll road operation rights during the period was RMB58,011,022.02.

Note 2:

During the period from 1 January 2014 to 30 September 2014, the increase in accumulated amortization for the period consisted of charge for the period of RMB199,780,614.86.

During the year of 2013, the increase in accumulated amortization for the year consisted of charge for the year of RMB184,508,838.87.

During the year of 2012, the increase in the original carrying amount consists of RMB59,990,000.00 transferred from construction in progress, while increase in accumulated amortization for the year consisted of charge for the year of RMB147,085,973.64.

During the year of 2011, the increase in accumulated amortization for the year consisted of charge for the year of RMB108,750,639.06.

— 156 —


10. Deferred tax assets

(1) Details of unrecognized deferred tax assets:

Unit: RMB

Item

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Deductible tax losses 1,723,169,395.37 1,901,857,223.95 1,999,956,476.78 1,674,354,903.74

Deductible temporary

differences 38,232,170.67 38,732,033.49 39,035,978.39 39,625,670.50

Total 1,761,401,566.04 1,940,589,257.44 2,038,992,455.17 1,713,980,574.24

(2) Deductible tax losses, for which no deferred tax assets are recognized, will expire

in the following years:

Unit: RMB

Expiration time

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Year 2012 — — — 128,262,991.14

Year 2013 — — 537,471,066.52 537,471,066.52

Year 2014 — 407,685,629.61 407,685,629.61 407,685,629.61

Year 2015 278,063,846.63 278,063,846.63 278,063,846.63 278,063,846.63

Year 2016 322,871,369.84 322,871,369.84 322,871,369.84 322,871,369.84

Year 2017 453,864,564.18 453,864,564.18 453,864,564.18 —

Year 2018 439,371,813.69 439,371,813.69 — —

Year 2019 228,997,801.03 — — —

(3) Deferred tax for the deductible tax losses and deductible temporary differences

are not recognized, because Ningchang Zhenli could not determine whether it can

obtain adequate taxable income to offset the deductible tax losses and deductible

temporary differences in the future.

— 157 —


11. Provision for impairment losses of assets

Period from 1 January 2014 to 30 September 2014

Unit: RMB

Decrease in the period

Item

1 January

2014

Increase in

the period Reversals Write-off

Other

Write-off

30 September

2014

Bad debt

provision 911,916.20 849,990.00 — — — 1,761,906.20

Year 2013

Unit: RMB

Decrease in the year

Item

1 January

2013

Increase

in the year Reversals Write-off

Other

Write-off

31 December

2013

Bad debt

provision 139,499.00 772,417.20 — — — 911,916.20

— 158 —


Year 2012

Unit: RMB


Item

1 January

2012

Increase


Other

Write-off

31 December

2012

Bad debt

provision — 139,499.00 — — — 139,499.00

Year 2011

Unit: RMB


Item

1 January

2011

Increase


Other

Write-off

31 December

2011

Bad debt

provision — — — — — —

— 159 —


12. Short-term borrowings

(1) Categories of short-term borrowings:

Unit: RMB

Item

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Bank loans — — 345,000,000.00 1,435,000,000.00

Including: Unsecured loans — — 145,000,000.00 355,000,000.00

Guaranteed loans

(Note 1) — — 100,000,000.00 100,000,000.00

Entrusted loans

(Note 2) — — 100,000,000.00 980,000,000.00

Non-bank financial

institutions Loans 635,000,000.00 1,030,000,000.00 970,000,000.00 —

Including: Unsecured

loans (Note 3) 195,000,000.00 250,000,000.00 100,000,000.00 —

Entrusted loans

(Note 4) 440,000,000.00 780,000,000.00 870,000,000.00 —

Loans from a related party 400,000,000.00 400,000,000.00 — —

Including: Short-term

bonds (Note 5) 400,000,000.00 400,000,000.00 — —

Other loans — 150,000,000.00 — —

Including: Trust Loans (Note 6) — 150,000,000.00 — —

Total 1,035,000,000.00 1,580,000,000.00 1,315,000,000.00 1,435,000,000.00

There are no short-term borrowings overdue but not yet repaid.

The interest of short-term borrowings stated above is: 30 September 2014: 5.55%-

6.60%; 31 December 2013: 5.30%-7.22%; 31 December 2012: 6.00%-7.22%; 31

December 2011: 4.86%-7.22%.

— 160 —


Note 1: Guaranteed loans indicate loans that guaranteed by Communications Holdings.

Note 2: Entrusted bank loans mainly include loans provided by Communications Holdings and its subsidiaries through banks.

Note 3: Unsecured non-bank financial institutions loans are provides by Group Finance Company.

Note 4: Unsecured non-bank financial institutions entrusted loans mainly include loans provided by Communications Holdings and its subsidiaries through Group Finance Company.

Note 5: Short-term bonds loan represent the bonds issued by Communications Holdings, and allocated to Ningchang Zhenli according to the fund use term of the bond prospectus. Ningchang Zhenli paid the corresponding interest and principal to Communications Holdings. The detail of the short-term bonds include: (1) Communications Holdings issued “13 Su Communications CP005” at 13 September 2013 and allocated RMB300,000,000.00 to Ningchang Zhenli. Bond duration is six month. Annual interest rate is 5.30%;(2) Communications Holdings issued “13 Su Communications CP008” at 22 November 2013 and allocated RMB100,000,000.00 to Ningchang Zhenli. Bond duration is twelve month. Annual interest rate is 6.60%;(3) Communications Holdings issued “14 Su Communications CP004” at 25 April 2014 and allocated RMB300,000,000.00 to Ningchang Zhenli. Bond duration is twelve month. Annual interest rate is 5.60%.

Note 6: Trust loans are provided by Sichuan trust Co., Ltd.

13. Accounts payable

(1) Details of Accounts payable are as follows:

Unit: RMB

Item

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Construction payable 16,512,233.79 26,330,604.60 40,198,592.82 79,488,243.67

Toll road fee payable 3,689,797.00 4,309,562.00 36,228,114.00 2,352,785.00

Goods payable 1,707,293.39 1,689,279.07 1,132,403.59 2,250,806.48

Patrol fee payable 5,838,750.00 4,671,000.00 2,335,500.00 2,335,500.00

Others 1,285,707.20 974,050.00 170,996.00 905,726.00

Total 29,033,781.38 37,974,495.67 80,065,606.41 87,333,061.15

— 161 —


(2) There is no accounts payable to shareholders holding at least 5% voting shares of

Ningchang Zhenli in the reporting period. Details of accounts payable to related

parties please refer to Note (IX) 4 (3).

Description of significant accounts payable aged more than one year:

At 30 September 2014, no significant accounts payable aged more than one year

exists.

31 December 2013

Unit: RMB

Company Name Closing balance

The reason of not timely

repayment or carried forward

Jiangsu Communication

Engineering Construction

Bureau 17,341,855.36 Long project settlement period

Changzhou Wujin

Communication Transport

Bureau 2,990,000.00 Long project settlement period

Total 20,331,855.36

31 December 2012

Unit: RMB





Engineering Construction Bureau 27,341,855.36 Long project settlement period

Total 27,341,855.36

— 162 —


31 December 2011

Unit: RMB





Engineering Construction Bureau 68,698,330.59 Long project settlement period

Total 68,698,330.59

Aging analysis of accounts payable is as follows:

Unit: RMB

Item

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Within 1 year 24,364,416.92 15,974,212.74 51,408,330.50 16,613,904.57

1-2 years 2,318,471.86 4,123,553.26 844,030.91 69,113,214.70

2-3 years 1,477,388.27 565,246.52 27,356,865.91 1,605,941.88

Over 3 years 873,504.33 17,311,483.15 456,379.09 —

Total 29,033,781.38 37,974,495.67 80,065,606.41 87,333,061.15

— 163 —


14. Employee benefits payable

Unit: RMB

1 January

2011

Increase

in the year

Decrease

in the year

31 December

2011

Increase

in the year

Decrease

in the year

31 December

2012

Increase

in the year

Decrease

in the year

31 December

2013

Increase

in the period

Decrease

in the period

30 September

2014

1. Wages or salaries, bonuses,

allowances and subsidies — 51,181,527.34 -51,181,527.34 — 57,555,338.58 -57,555,338.58 — 62,476,491.55 -62,476,491.55 — 31,903,616.95 -31,903,616.95 —

2. Social security contributions — 5,557,312.68 -5,557,312.68 — 6,125,777.21 -6,125,777.21 — 6,726,649.98 -6,726,649.98 — 3,672,398.09 -3,672,398.09 —

Including: Medical insurance — 5,063,423.95 -5,063,423.95 — 5,614,513.67 -5,614,513.67 — 6,070,026.60 -6,070,026.60 — 3,011,606.80 -3,011,606.80 —

Work injury insurance — 223,792.86 -223,792.86 — 221,488.14 -221,488.14 — 310,575.90 -310,575.90 — 395,458.80 -395,458.80 —

Maternity insurance — 270,095.87 -270,095.87 — 289,775.40 -289,775.40 — 346,047.48 -346,047.48 — 265,332.49 -265,332.49 —

3. Housing funds — 3,926,222.00 -3,926,222.00 — 4,379,681.68 -4,379,681.68 — 4,994,796.00 -4,994,796.00 — 4,046,242.00 -4,046,242.00 —

4. Defined contribution plans

(Note) — 10,824,248.24 -10,824,248.24 — 12,181,604.77 -12,181,604.77 — 13,581,697.11 -13,581,697.11 — 10,664,579.66 -10,664,579.66 —

Including: Basic pension

insurance — 7,631,997.23 -7,631,997.23 — 7,932,095.13 -7,932,095.13 — 9,113,631.35 -9,113,631.35 — 7,149,526.40 -7,149,526.40 —

Annuity scheme — 2,535,422.00 -2,535,422.00 — 3,544,554.00 -3,544,554.00 — 3,710,664.00 -3,710,664.00 — 3,054,654.77 -3,054,654.77 —

Unemployment

insurance — 656,829.01 -656,829.01 — 704,955.64 -704,955.64 — 757,401.76 -757,401.76 — 460,398.49 -460,398.49 —

5. Termination benefits — — — — 47,924.00 -47,924.00 — 99,110.00 -99,110.00 — — — —

6. Staff welfare — 3,350,512.00 -3,350,512.00 — 5,160,082.60 -5,160,082.60 — 3,332,244.79 -3,332,244.79 — 6,613,228.00 -6,613,228.00 —

7. Union running and

employees education cost 801,099.42 2,303,168.74 -1,503,138.69 1,601,129.47 2,589,990.60 -1,575,729.77 2,615,390.30 1,657,616.87 -1,364,068.18 2,908,938.99 638,072.36 -692,349.36 2,854,661.99

8. Housing subsidy — 4,066,639.00 -4,066,639.00 — 4,677,758.64 -4,677,758.64 — 5,348,772.00 -5,348,772.00 — 4,418,938.60 -4,418,938.60 —

Total 801,099.42 81,209,630.00 -80,409,599.95 1,601,129.47 92,718,158.08 -91,703,897.25 2,615,390.30 98,217,378.30 -97,923,829.61 2,908,938.99 61,957,075.66 -62,011,352.66 2,854,661.99

There is no amount of default and non-monetary benefits in the employee benefit payable

at the end of the reporting period.

— 164 —


Note:

Ningchang Zhenli participates in basic pension insurance, unemployment insurance plan established by government in accordance with the relevant requirements. According to the plan, Ningchang Zhenli makes a monthly contribution equivalent to 20% and 1.5%-2% of the employee’s monthly basic wage based on last year’s salary. Ningchang Zhenli participates annuity scheme which operated by an independent third party and makes a monthly contribution equivalent to 8.33% of the employee’s monthly basic wage based on last year’s salary. Ningchang Zhenli no longer undertake further payment obligation. The corresponding cost charges to the profit or loss for the current period or the cost of a relevant asset when occur.

For the period from 1 January 2014 to 30 September 2014, Ningchang Zhenli contributes RMB7,149,526.40, RMB3,054,654.77, RMB460,398.49 to basic pension insurance, annuity scheme, unemployment insurance plan respectively (Year 2013: RMB9,113,631.35, RMB3,710,664.00, RMB757,401.76; Year 2012: RMB7,932,095.13, RMB3,544,554.00, RMB704,955.64; Year 2011: RMB7,631,997.23, RMB2,535,422.00, RMB656,829.01). All the contribution had been paid over to the scheme as at 30 September 2014, 31 December 2013, 31 December 2012 and 31 December 2011.

15. Taxes payable

Unit: RMB

Item

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Business tax 2,088,846.41 1,418,766.31 1,250,654.46 1,334,490.31

City maintenance

and construction tax 145,218.32 98,745.20 87,049.17 93,411.72

Education surcharge 104,442.31 70,938.31 62,532.76 67,153.61

Land use tax 102,470.90 127,471.03 289,650.01 4,000.00

Property tax 72,478.98 891,483.73 1,307,533.73 1,000.00

Individual income tax 31,604.89 733,233.42 1,141,645.44 752,472.87

VAT -350,868.77 -158,464.66 -53,267.35 -41,435.85

Total 2,194,193.04 3,182,173.34 4,085,798.22 2,211,092.66

— 165 —


16. Other payables

Details of other payables are as follows:

Unit: RMB

Item

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Rural road construction

funds (Note) 50,882,918.19 4,526,350.77 3,946,024.65 4,261,612.01

Other 1,284,266.37 1,357,449.17 643,835.69 563,729.39

Total 52,167,184.56 5,883,799.94 4,589,860.34 4,825,341.40

Note: Ningchang Zhenli withholds the rural road construction funds according to 10% of the toll revenue.

17. Interest payable

Unit: RMB

Item

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Interest payable of

short-term borrowings 14,084,901.05 7,113,336.00 2,497,972.89 2,831,284.04

Interest payable of long-term

borrowings with interest

payable by installments and

principal payable on maturity 41,150,297.76 34,431,259.42 22,764,588.89 11,857,341.52

Total 55,235,198.81 41,544,595.42 25,262,561.78 14,688,625.56

— 166 —


18. Non-current liabilities due within one year

(1) Details of non-current liabilities due within one year are as follows:

Unit: RMB

Item

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Long-term borrowings

due within one year 499,000,000.00 687,600,000.00 729,900,000.00 338,000,000.00

Total 499,000,000.00 687,600,000.00 729,900,000.00 338,000,000.00

Long-term borrowings due within one year

Unit: RMB

Item

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Bank loans 269,000,000.00 687,600,000.00 729,900,000.00 338,000,000.00

Including: Guaranteed loans 51,000,000.00 469,600,000.00 511,900,000.00 278,000,000.00

Secured loans 218,000,000.00 218,000,000.00 218,000,000.00 60,000,000.00

Non-bank financial

institutions Loans 30,000,000.00 — — —

Including: Entrusted loans 30,000,000.00 — — —

Loans from a related party 200,000,000.00 — — —

Including: Private Placement

Bonds 200,000,000.00 — — —

Total 499,000,000.00 687,600,000.00 729,900,000.00 338,000,000.00

— 167 —


Top five long-term borrowings due within one year

30 September 2014

Unit: RMB

Lender

Inception date

of borrowing

Maturity date

of borrowing Currency Interest rate

Closing

balance

(%)

Communications

Holdings

22/02/2012 22/02/2015 RMB 6.09 200,000,000.00

China

Development

Bank

23/02/2006 23/02/2015 RMB 6.55 50,000,000.00

China

Development

Bank

26/04/2006 26/04/2015 RMB 6.55 50,000,000.00

China Citic Bank 26/04/2006 26/04/2015 RMB 6.22 50,000,000.00

Bank of China 17/01/2007 17/01/2015 RMB 6.55 44,000,000.00

Total 394,000,000.00

— 168 —


31 December 2013

Unit: RMB

Lender

Inception date

of borrowing

Maturity date


Closing

balance

(%)

China Merchants

Bank

22/02/2006 22/02/2014 RMB 6.55 147,400,000.00

China Merchants

Bank

16/06/2006 16/06/2014 RMB 6.55 122,400,000.00


China

Development

Bank

28/11/2007 28/11/2014 RMB 6.55 80,000,000.00

China

Development

Bank

31/08/2005 31/08/2014 RMB 6.55 50,000,000.00

Total 503,800,000.00

— 169 —


31 December 2012

Unit: RMB

Lender

Inception date

of borrowing

Maturity date


Closing

balance

(%)

China Merchants

Bank

26/10/2005 26/10/2013 RMB 7.05 98,600,000.00

China Merchants

Bank

30/08/2005 30/08/2013 RMB 7.05 98,600,000.00

China Merchants

Bank

27/12/2005 27/12/2013 RMB 7.05 98,600,000.00


China

Development

Bank

19/09/2006 19/09/2013 RMB 7.05 60,000,000.00

Total 435,800,000.00

31 December 2011

Unit: RMB

Lender

Inception date

of borrowing

Maturity date


Closing

balance

(%)



Bank of China 17/01/2007 17/01/2012 RMB 6.60 50,000,000.00

China

Development

Bank

19/09/2006 19/09/2012 RMB 6.40 20,000,000.00

China

Development

Bank

28/11/2007 28/11/2012 RMB 6.40 20,000,000.00

Total 290,000,000.00

— 170 —


19. Long-term borrowings

(1) Categories of long-term borrowings

Unit: RMB

Item

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Bank loans 3,930,500,000.00 4,547,600,000.00 5,334,000,000.00 5,672,500,000.00

Including: Secured loans

(Note 1) 1,963,000,000.00 2,111,000,000.00 2,329,000,000.00 1,520,000,000.00

Guaranteed loans

(Note 2) 1,967,500,000.00 2,436,600,000.00 3,005,000,000.00 4,152,500,000.00

Non-bank financial

institutions Loans 930,000,000.00 330,000,000.00 — —

Including: Entrusted loans

(Note 3) 930,000,000.00 330,000,000.00 — —

Loans from a related party 1,400,000,000.00 850,000,000.00 450,000,000.00 —

Including: Private Placement

Bonds (Note 4) 550,000,000.00 200,000,000.00 200,000,000.00 —

Medium Term

Notes (Note 4) 850,000,000.00 650,000,000.00 250,000,000.00 —

Sub-total 6,260,500,000.00 5,727,600,000.00 5,784,000,000.00 5,672,500,000.00

Less: Long-term borrowings


Total Long-term borrowings

due after one year 5,761,500,000.00 5,040,000,000.00 5,054,100,000.00 5,334,500,000.00

Interest of long-term borrowings stated above are as follows: 30 September 2014:

5.90%-6.78%; 31 December 2013: 5.90%-6.68%; 31 December 2012: 6.10%-7.05%;

31 December 2011: 6.08%-6.60%.

— 171 —


Explanation of categories of long-term borrowings:

Note 1: The secured loans please refer to Note (VIII) 9 for more information about categories and amount of secured assets.


Note 3: Entrusted loans from non-bank financial institutions mainly include loans provided by Communications Holdings and its subsidiaries through Group Finance Company.

Note 4: Private Placement Bonds and Medium Term Notes represent the bonds issued by Communications Holdings, and allocated to Ningchang Zhenli according to the fund use term of the bond prospectus. Ningchang Zhenli paid the corresponding interest and principal to Communications Holdings. The detail of Private Placement Bonds include: (1) Communications Holdings issued “12 Su Communications PPN001” at 22 February 2012 and allocate RMB200,000,000.00 to Ningchang Zhenli. Bond duration is three years. Annual interest rate is 6.39%; (2) Communications Holdings issued “14 Su Communications PPN003” at 22 August 2014 and allocate RMB350,000,000.00 to Ningchang Zhenli. Bond duration is three years. Annual interest rate is 6.10%. The detail of Medium Term Notes include: (1) Communications Holdings issued “12 Su Communications MTN2” at 5 December 2012 and allocate RMB250,000,000.00 to Ningchang Zhenli. Bond duration is ten years. Annual interest rate is 6.10%; (2) Communications Holdings issued “13 Su Communications MTN2” at 17 May 2013 and allocate RMB400,000,000.00 to Ningchang Zhenli. Bond duration is ten years. Annual interest rate is 5.90%; (3) Communications Holdings issued “14 Su Communications MTN2” at 17 May 2014 and allocate RMB200,000,000.00 to Ningchang Zhenli. Bond duration is five years. Annual interest rate is 6.10%.

— 172 —


Top five long-term borrowings

30 September 2014

Unit: RMB

Lender

Inception date

of borrowing

Maturity date


Closing

balance

(%)

Group Finance

Company

18/02/2014 31/12/2023 RMB 6.78 600,000,000.00

Communications

Holdings

17/05/2013 17/05/2023 RMB 5.90 400,000,000.00

Communications

Holdings

22/08/2014 22/08/2017 RMB 6.10 350,000,000.00

Group Finance

Company

26/02/2013 25/02/2019 RMB 6.68 300,000,000.00

Communications

Holdings

05/12/2012 05/12/2022 RMB 6.10 250,000,000.00

Total 1,900,000,000.00

— 173 —


31 December 2013

Unit: RMB

Lender

Inception date

of borrowing

Maturity date


Closing

balance

(%)

Communications

Holdings

17/05/2013 17/05/2023 RMB 5.90 400,000,000.00

Group Finance

Company

26/02/2013 25/02/2019 RMB 6.68 300,000,000.00

Communications

Holdings

05/12/2012 05/12/2022 RMB 6.10 250,000,000.00

China

Development

Bank

27/05/2005 25/03/2020 RMB 6.55 200,000,000.00

China

Construction

Bank

21/02/2006 20/03/2020 RMB 6.55 200,000,000.00

Total 1,350,000,000.00

— 174 —


31 December 2012

Unit: RMB

Lender

Inception date

of borrowing

Maturity date


Closing

balance

(%)

Communications

Holdings

05/12/2012 05/12/2022 RMB 6.10 250,000,000.00

Communications

Holdings

22/02/2012 22/02/2015 RMB 6.39 200,000,000.00

China

Development

Bank

27/05/2005 25/03/2020 RMB 7.05 200,000,000.00

China

Construction

Bank

21/02/2006 20/03/2020 RMB 7.05 200,000,000.00

China

Development

Bank

23/02/2006 25/03/2020 RMB 7.05 170,000,000.00

Total 1,020,000,000.00

— 175 —


31 December 2011

Unit: RMB

Lender

Inception date

of borrowing

Maturity date


Closing

balance

(%)

China

Construction

Bank

21/02/2006 20/03/2020 RMB 6.60 200,000,000.00

China

Development

Bank

27/05/2005 25/03/2020 RMB 6.40 200,000,000.00

Bank of China 17/01/2007 21/12/2020 RMB 6.60 184,000,000.00

China

Development

Bank

28/11/2007 28/11/2022 RMB 6.40 180,000,000.00

China

Development

Bank

23/02/2006 25/03/2020 RMB 6.40 170,000,000.00

Total 934,000,000.00

Analysis of maturity for long-term borrowings over one year is as follows:

Unit: RMB

Item

30 September

2014

31 December

2013

31 December

2012

31 December

2011

1-2 years 820,000,000.00 310,000,000.00 524,600,000.00 506,600,000.00

2-5 years 1,271,500,000.00 1,697,000,000.00 1,170,000,000.00 1,399,400,000.00

Over 5 years 3,670,000,000.00 3,033,000,000.00 3,359,500,000.00 3,428,500,000.00

Total 5,761,500,000.00 5,040,000,000.00 5,054,100,000.00 5,334,500,000.00

— 176 —


20. Other non-current liabilities

Unit: RMB

Item

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Deferred income (Note) 36,470,363.93 37,820,117.28 38,896,479.38 39,625,670.49

Note: The deferred income is appropriated by People’s Government of Wujin District of Changzhou City for construction of Ningchang expressway road, due to the extra cost of construction of Wujin Development Zone viaduct project. The project construction subsidy is RMB40,000,000.00, Ningchang Zhenli recognizes the project construction subsidy as a compensation of the construction cost of Ningchang expressway which is recorded in deferred income.

Government grants

Unit: RMB

Item

1 January

2011

Transfer

to non-

operating

income for

the year

31

December

2011

Transfer

to non-

operating

income for

the year

31

December

2012

Transfer

to non-

operating

income for

the year

31

December

2013

Transfer

to non-

operating

income for

the period

30

September

2014

Related to asset/

Related to

income

Ningchang

Expressway

Construction

Compensation 40,120,776.10 -495,105.61 39,625,670.49 -729,191.11 38,896,479.38 -1,076,362.10 37,820,117.28 -1,349,753.35 36,470,363.93 Related to asset

— 177 —


21. Share capital

Unit: RMB

30 September 2014 31 December 2013, 31 December 2012 31 December 2011

Investors Amount Rate Amount Rate Amount Rate

(%) (%) (%)

Communications Holdings 3,328,850,000.00 100 2,910,415,000.00 87 105,000,000.00 70

Zhenjiang Communications

Investment Construction

Development Company

Limited — — 265,310,000.00 8 11,955,000.00 8

Changzhou Expressway

Investment Development

Company Limited — — 90,210,000.00 3 30,210,000.00 20

Nanjing Highway Development

(Group) Company Limited — — 62,915,000.00 2 2,835,000.00 2

Total 3,328,850,000.00 100 3,328,850,000.00 100 150,000,000.00 100

— 178 —


22. Capital reserve

Unit: RMB

Item

Opening

balance

Increase in

the year (period)

Decrease in

the year (period)

Closing

balance

During the period from

1 January 2014 to 30

September 2014 and

in 2013:

Capital premium — — — —

Including: Capital contributed

by investors — — — —

Total — — — —

In 2012:

Capital premium 2,891,680,000.00 — -2,891,680,000.00 —


by investors 2,891,680,000.00 — -2,891,680,000.00 —

Total 2,891,680,000.00 — -2,891,680,000.00 —

In 2011:

Capital premium 2,891,680,000.00 — — 2,891,680,000.00


by investors 2,891,680,000.00 — — 2,891,680,000.00

Total 2,891,680,000.00 — — 2,891,680,000.00

— 179 —


23. Accumulated losses

Unit: RMB

Item

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

Accumulated losses

of Opening balance -2,877,723,278.62 -2,427,727,849.41 -2,427,727,849.41 -1,961,096,698.46 -1,627,466,206.50

Add: Net loss of

current year (period) -240,623,632.29 -312,138,187.67 -449,995,429.21 -466,631,150.95 -333,630,491.96

Accumulated losses of

Closing balance -3,118,346,910.91 -2,739,866,037.08 -2,877,723,278.62 -2,427,727,849.41 -1,961,096,698.46

24. Operating income, Operating costs

(1) Operating income, Operating costs

Unit: RMB

From 1 January 2014 to

30 September 2014


30 September 2013 (Unaudited)

Item

Operating

income

Operating

costs

Operating

income

Operating

costs

Principal operating income 482,999,013.34 350,046,695.79 325,458,238.90 272,009,578.10

Including: Toll revenue 471,667,864.33 314,220,837.76 318,583,192.97 236,740,088.68

Ancillary services 11,331,149.01 35,825,858.03 6,875,045.93 35,269,489.42

Other operating income 8,653,135.00 261,693.09 4,215,067.73 2,269,223.32

Including: Rental and other 8,653,135.00 261,693.09 4,215,067.73 2,269,223.32

Total 491,652,148.34 350,308,388.88 329,673,306.63 274,278,801.42

— 180 —


Year 2013 Year 2012 Year 2011

Item

Operating

income

Operating

costs

Operating

income

Operating

costs

Operating

income

Operating

costs

Principal operating income 447,443,874.22 401,529,959.25 413,119,751.49 355,595,133.42 435,721,407.48 291,249,279.24

Including: Toll revenue 437,974,669.29 346,183,101.72 403,463,170.22 301,604,947.98 421,527,384.50 239,661,040.04

Ancillary

services 9,469,204.93 55,346,857.53 9,656,581.27 53,990,185.44 14,194,022.98 51,588,239.20

Other operating income 8,695,942.18 2,899,388.14 9,778,205.31 6,154,113.56 6,789,262.55 6,995,335.73

Including: Rental and other 8,695,942.18 2,899,388.14 9,778,205.31 6,154,113.56 6,789,262.55 6,995,335.73

Total 456,139,816.40 404,429,347.39 422,897,956.80 361,749,246.98 442,510,670.03 298,244,614.97

(2) Principal operating activities (classified by geographical areas): The principal

operation activities of Ningchang Zhenli are located and carried out in Jiangsu

Province.

(3) The operating income of Ningchang Zhenli top five customers: the operating

income principally includes the toll revenue and ancillary services income etc.

Ningchang Zhenli is unable to present top five customers because of the nature of

the business.

25. Business taxes and levies

Unit: RMB

Item

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

Business tax 15,107,727.60 10,111,479.64 13,993,112.35 13,058,981.98 13,451,197.95


construction tax 1,049,133.07 703,503.44 973,660.20 908,809.05 949,979.01

Education surcharge 755,386.37 505,574.01 699,655.68 653,289.55 675,890.24

Other — — 33,120.00 — —

Total 16,912,247.04 11,320,557.09 15,699,548.23 14,621,080.58 15,077,067.20

— 181 —


26. Administrative expenses

Unit: RMB

Item

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

Employee benefits

expenses 7,136,258.22 6,642,049.61 12,286,905.54 11,466,271.16 10,155,712.84

Depreciation and

amortization 726,379.50 1,305,867.55 1,704,922.28 1,887,510.89 1,867,779.03

Auditor’s

remuneration 160,000.00 150,000.00 150,000.00 140,000.00 133,000.00

Consulting and

intermediary

service fees 37,000.00 422,000.00 575,909.00 678,000.00 183,000.00

Property tax and

other taxes 960,580.21 1,230,042.01 2,292,896.90 5,554,495.12 819,693.63

Entertainment fees 78,140.81 148,443.00 156,563.00 311,572.04 509,521.12

Maintenance

and repair costs 56,274.00 7,972.00 15,777.00 39,127.00 39,668.00

Office expenses 105,256.45 80,694.58 112,792.60 151,214.50 99,141.70

Travelling expenses 74,383.10 235,853.60 326,597.60 330,121.32 319,985.00

Vehicle related

expenses 131,716.50 213,960.50 321,682.00 201,618.50 269,093.00

Fuel cost 263,650.05 250,500.00 413,650.00 604,742.00 400,750.00

Other 425,002.45 520,952.62 749,636.74 1,189,870.58 1,309,134.57

Total 10,154,641.29 11,208,335.47 19,107,332.66 22,554,543.11 16,106,478.89

— 182 —


27. Financial expenses

Unit: RMB

Item

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

Interest expenses 356,144,678.25 347,592,784.89 468,767,840.30 489,672,420.37 445,576,459.91

Including: Wholly

repayable

within

five years 171,028,818.66 158,607,235.12 216,787,107.27 255,327,204.85 213,203,959.91

Not wholly

repayable

within

five years 185,115,859.59 188,985,549.77 251,980,733.03 234,345,215.52 232,372,500.00

Less: Interest income 1,663,902.26 933,019.21 1,356,503.65 1,193,112.78 2,239,166.34

Others 18,838.47 6,724.24 28,616.60 31,256.12 711,557.30

Total 354,499,614.46 346,666,489.92 467,439,953.25 488,510,563.71 444,048,850.87

28. Impairment loss on assets

Unit: RMB

Item

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

Bad debt of accounts

receivables 849,990.00 — 765,691.00 139,499.00 —

Bad debt of other

receivables — — 6,726.20 — —

Total 849,990.00 — 772,417.20 139,499.00 —

— 183 —


29. Non-operating income

(1) Details of non-operating income are as follows:

Unit: RMB

Item

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

Total gains on disposal

of non-current assets 192.53 1,684,226.31 1,684,226.31 — —

Including: Gains on

disposal of

fixed assets 192.53 1,684,226.31 1,684,226.31 — —

Compensation income

from damaged road 700,000.00 1,270,783.85 2,114,360.35 1,482,318.51 1,942,554.30

Government grants 1,349,753.35 790,756.44 1,076,362.10 729,191.11 495,105.61

Others 4,960.00 9,593.40 30,833.40 26,647.11 —

Total 2,054,905.88 3,755,360.00 4,905,782.16 2,238,156.73 2,437,659.91

(2) Government grants recorded into current profits and losses

Unit: RMB

Grants programs

From 1

January

2014 to 30

September

2014

From 1

January

2013 to 30

September

2013 Year 2013 Year 2012 Year 2011

Related to asset /

Related to income

(Unaudited)

Ningchang

Expressway

Construction

Compensation 1,349,753.35 790,756.44 1,076,362.10 729,191.11 495,105.61 Related to asset

— 184 —


30. Non-operating expenses

Unit: RMB

Item

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

Total losses on

disposal of

non-current assets 279,030.99 8,257.79 8,257.79 1,476,810.07 —

Including: Losses on

disposal

of fixed

assets 279,030.99 8,257.79 8,257.79 1,476,810.07 —

Repair expenditure

of damaged road 960,447.40 1,491,316.09 2,312,394.25 1,740,154.17 2,229,107.25

Others 366,326.45 593,096.52 1,271,777.00 975,366.86 2,872,702.72

Total 1,605,804.84 2,092,670.40 3,592,429.04 4,192,331.10 5,101,809.97

31. Income tax expenses

Unit: RMB

Item

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

Current tax expense

calculated according

to tax laws and

relevant

requirements — — — — —

Deferred income

tax expenses — — — — —

Total — — — — —

— 185 —


No provision for Hong Kong Profits Tax has been made as the income neither arises, nor

is derived from Hong Kong.

Reconciliation of income tax expenses to the accounting loss is as follows:

Unit: RMB

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

Accounting Loss -240,623,632.29 -312,138,187.67 -449,995,429.21 -466,631,150.95 -333,630,491.96

Income tax expenses

calculated at 25% -60,155,908.07 -78,034,546.92 -112,498,857.30 -116,657,787.74 -83,407,622.99

Effect of expenses that are not

deductible for tax purposes 3,031,423.52 2,048,917.57 2,731,890.10 3,339,069.72 2,813,556.93

Effect of previously

unrecognized deductible

temporary differences

reversal -124,965.71 -52,860.88 -75,986.22 -147,423.03 -123,776.40

Effect of unrecognized

deductible losses and

deductible temporary

differences 57,249,450.26 76,038,490.23 109,842,953.42 113,466,141.05 80,717,842.46

Income tax expenses — — — — —

— 186 —


32. Supplementary information to the statement of profit or loss and other

comprehensive income

Unit: RMB

Item

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

Energy cost 3,561,652.68 3,900,604.82 5,010,296.43 4,862,166.39 4,701,400.28

Maintenance and repair costs 2,030,970.76 4,268,631.12 10,726,403.47 5,938,541.80 7,678,184.45

Equipment usage fee 3,811,284.54 4,395,729.32 6,641,183.23 6,374,232.99 4,748,626.70

Patrol fee 3,559,172.84 3,661,543.36 4,835,314.73 4,835,245.13 4,871,416.12

Network management fee 2,419,439.56 971,178.83 2,167,064.09 1,725,813.38 1,454,520.04

Outsourcing service cost 17,880,031.80 4,227,438.21 10,833,063.80 8,077,383.27 12,592,814.02

Usage of raw materials 5,615,637.34 3,630,740.15 5,009,406.55 5,152,244.48 7,760,401.41

Employee benefits expense 61,957,075.66 55,962,981.15 98,217,378.30 92,718,158.08 81,209,630.00

Depreciation and amortization 251,902,961.34 193,228,208.09 262,455,762.15 232,441,613.98 171,406,924.38

Current asset impairment loss 849,990.00 — 772,417.20 139,499.00 —


Other expenses 6,079,739.86 10,313,786.87 16,312,920.25 21,016,533.93 16,399,567.42

Total 715,812,634.63 632,153,626.81 891,749,050.50 872,953,852.80 758,399,944.73

33. Earnings per share

Earnings per share are not presented as it is not considered meaningful with regard to this

Financial Information.

— 187 —


34. Notes to items in the statement of cash flows

(1) Other cash receipts relating to operating activities:

Unit: RMB

Item

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

Collection of funds

for construction

of rural roads 46,356,567.42 420,202.08 580,326.12 — —

Receipts from

compensation of

damaged road and

non-operating

income items, etc. 654,945.31 1,280,377.25 2,236,435.96 2,505,959.01 1,942,554.29

Receipts from interest

income of bank

deposit 1,663,902.26 941,312.19 1,356,503.65 1,193,112.78 2,239,166.34

Total 48,675,414.99 2,641,891.52 4,173,265.73 3,699,071.79 4,181,720.63

(2) Other cash payments relating to operating activities:

Unit: RMB

Item

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

Payment of non-salary

and other

expenditure 2,192,802.90 3,428,344.83 3,918,587.34 4,491,118.74 9,632,487.24

Total 2,192,802.90 3,428,344.83 3,918,587.34 4,491,118.74 9,632,487.24

— 188 —


(3) Other cash receipts relating to investing activities: N/A

(4) Other cash payments relating to investing activities: N/A

(5) Other cash receipts relating to financing activities:

Unit: RMB

Item

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

Receipt of the

money deposited

in the financial

settlement center

of Communications

Holdings — — — 45,978,741.51 26,900,561.02

Total — — — 45,978,741.51 26,900,561.02

(6) Other cash payments relating to financing activities: N/A

— 189 —


35. Supplementary information to the statement of cash flows

(1) Supplementary information to the statement of cash flows

Unit: RMB

Supplementary information

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30

September 2013

(Unaudited)

1. Reconciliation of net loss to cash

flow from operating activities:

Net Loss -240,623,632.29 -312,138,187.67

Add: Impairment of assets 849,990.00 —

Depreciation of fixed assets 52,122,346.48 57,386,982.81

Amortization of intangible assets 199,780,614.86 135,841,225.28

Losses on disposal of fixed assets,

intangible assets and other long-term

assets (gains are indicated by “—”) 278,838.46 -1,675,968.52

Financial expenses

(income is indicated by “—”) 356,144,678.25 347,592,784.89

Decrease in inventories

(increase is indicated by “—”) 70,357.77 80,582.38

Decrease in receivables from operating

activities (increase is indicated by “—”) -7,847,464.13 -7,167,408.75

Increase in payables from operating

activities (decrease is indicated by “—”) 53,918,025.23 -36,425,940.80

Net cash flow from operating activities 414,693,754.63 183,494,069.62

2. Net changes in cash and cash equivalents:

Closing balance of cash 108,070,531.26 60,899,377.23

Less: Opening balance of cash 90,319,384.10 105,782,304.01

Net increase (decrease) in cash and cash equivalents 17,751,147.16 -44,882,926.78

— 190 —


Unit: RMB

Supplementary information Year 2013 Year 2012 Year 2011

1. Reconciliation of net profit to cash


Net Loss -449,995,429.21 -466,631,150.95 -333,630,491.96

Add: Impairment of assets 772,417.20 139,499.00 —

Depreciation of fixed assets 77,946,923.28 85,355,640.34 62,656,285.32

Amortization of

intangible assets 184,508,838.87 147,085,973.64 108,750,639.06

Losses on disposal of fixed

assets, intangible assets

and other long-term assets

(gains are indicated

by “—”) -1,675,968.52 1,476,810.07 —

Financial expenses (income

is indicated by “—”) 468,767,840.30 489,672,420.37 445,576,459.91


(increase is indicated

by “—”) 82,125.95 485,039.48 172,930.18

Decrease in receivables from

operating activities


by “—”) 1,391,331.16 3,281,323.68 2,742,723.88

Increase in payables from


(decrease is indicated

by “—”) -27,483,609.43 28,001,314.71 3,351,387.42

Net cash flow from

operating activities 254,314,469.60 288,866,870.34 289,619,933.81

2. Net changes in cash and

cash equivalents:

Closing balance of cash 90,319,384.10 105,782,304.01 21,114,461.89

Less: Opening balance of cash 105,782,304.01 21,114,461.89 19,861,414.50

Net increase (decrease) in cash

and cash equivalents -15,462,919.91 84,667,842.12 1,253,047.39

— 191 —


(IX) RELATED PARTY RELATIONSHIP AND TRANSACTIONS

1. Parent company of Ningchang Zhenli

Unit: RMB

Name of the

parent company

Related party

relationship

Type of

Ningchang

Zhenli Registry

Legal

representative Nature of business Registered capital

Proportion

of Ningchang

Zhenli’s

ownership

interest held

by the parent

Proportion

of Ningchang

Zhenli’s

voting power

held by the

parent

Ultimate

controlling party

of Ningchang

Zhenli Organization code

(%) (%)

Communications

Holdings

Parent company and

ultimate shareholder

State owned Nanjing,

Jiangsu

Province

Chang Qing Investment, construction, operation

and management of traffic

infrastructure, transportation and

other relevant industry

16,800,000,000.00 100 100 Communications

Holdings

13476706-3

2. Other related parties of Ningchang Zhenli

Name of other related party

Relationship between

other related parties and

Ningchang Zhenli Organization code

Jiangsu Expressway Network Operation

and Management Co., Ltd.

(“Network Operation Company”) Same ultimate shareholder 77050954-0

Jiangsu Sundian Engineering Co., Ltd. (“Sundian”) Same ultimate shareholder 74821796-3

Jiangsu Expressway Petroleum Development Co., Ltd.

(“Expressway Petroleum Company”) Same ultimate shareholder 73572481-9

Jiangsu Far East Shipping Co., Ltd.

(“Far East Shipping”) Same ultimate shareholder 73225111-2

Jiangsu Ocean Shipping Co., Ltd (“Ocean Shipping”) Same ultimate shareholder 13476224-9

Jiangsu Kuailu Vehicle Transport Co., Ltd

(“Kuailu Vehicle Transport”) Same ultimate shareholder 13478934-2

Jiangsu Communications Holdings Group Finance

Company Limited (“Group Finance Company”) Same ultimate shareholder 58843422-0

— 192 —




other related parties and

Ningchang Zhenli Organization code

Jiangsu Runyang Bridge Development

Co., Ltd (“Runyang Bridge”) Same ultimate shareholder 73225111-2

Jiangsu Expressway Information Engineering

Co., Ltd. (“Information Company”) Same ultimate shareholder 58843422-0

Jiangsu HuaTong Engineering Testing

Co., Ltd. (“Huatong testing”) Same ultimate shareholder 71409204-X

Taicang Port Container Shipping Co., Ltd.

(“Taicang container”) Same ultimate shareholder 74235180-3

Jiangsu Fenguan Expressway Management

Limited (“Fenguan Expressway”) Same ultimate shareholder 76358446-2

Jiangsu Jinghu Expressway Co., Ltd

(“Jinghu Expressway”) Same ultimate shareholder 57952256-0

Jiangsu Lianxu Expressway Co., Ltd.

(“Lianxu Expressway”) Same ultimate shareholder 77804509-0

Jiangsu Sutong Bridge Co., Ltd. (“Sutong Bridge”) Same ultimate shareholder 70404938-X

Jiangsu railway development Co., Ltd.

(“Railway Development”) Same ultimate shareholder 70404937-1

Jiangsu Yanjiang Expressway Co., Ltd.

(“Yanjiang Expressway”) Same ultimate shareholder 74133947-4

Jiangsu Ninghang Expressway Co., Ltd.

(“Ninghang Expressway”) Same ultimate shareholder 73441778-9

Jiangsu Yangtse River Bridge Co., Ltd.

(“Yangtze Bridge”) Same ultimate shareholder 13476509-2

Nantong TongSha Port Company Limited

(“TongSha Port”) Same ultimate shareholder 71152368-4

— 193 —


3. Related party transactions

(1) Sales and purchase of goods, provision and receipt of of service

Unit: RMB


30 September 2014


30 September 2013 (Unaudited)

Related Party

Type of

related party

transactions

Details of

related party

transaction Amount

Proportion of

the amount of

related party

transactions to

that of similar

transactions Amount

Proportion of

the amount of

related party

transactions to

that of similar

transactions

(%) (%)

Sundian Receive Service Road maintenance

fee

18,874,169.20 100 8,724,779.93 100

Network

Operation

Company

Receive Service Networking

service fee

2,375,116.20 100 1,701,772.77 100

Information

Company

Receive Service Communication

system

maintenance fee

337,500.00 100 337,500.00 100

Network

Operation

Company

Provide Service ETC customer

network

management

fee

69,216.10 100 45,259.01 100

Huatong testing Receive Service Bridge inspection

and

maintenance fee

— — 248,181.83 100

— 194 —



Related Party

Type of

related party

transactions

Details of related

party transaction Amount

Proportion of

the amount of

related party

transactions to

that of similar

transactions Amount

Proportion of

the amount of

related party

transactions to

that of similar

transactions Amount

Proportion of

the amount of

related party

transactions to

that of similar

transactions

(%) (%) (%)

Sundian Receive

Service

Road maintenance

fee

11,633,039.90 100 8,857,775.77 100 13,033,446.81 100

Network

Operation

Company

Receive

Service

Networking service

fee

2,101,623.00 100 1,626,823.00 100 1,437,318.00 100

Information

Company

Receive

Service

Communication

system

maintenance fee

450,000.00 100 450,000.00 100 450,000.00 100

Network

Operation

Company

Provide

Service

ETC customer

network

management fee

60,345.35 100 373,005.22 100 — —

Huatong

testing

Receive

Service

Bridge inspection

and maintenance

fee

330,909.10 100 379,000.00 100 — —

— 195 —


(2) Interest expense of borrowings and Interest income of deposit

Unit: RMB


30 September 2014


30 September 2013 (unaudited)

Related

Type of related

party transactions

Details of related


Proportion of the

amount of related

party transactions

to that of similar

transactions Amount

Proportion of the

amount of related

party transactions

to that of similar

transactions

(%) (%)

Group Finance

Company

Interest income Interest income from

bank deposits

1,483,327.05 89 769,577.20 82

Group Finance

Company

Lending of funds Interest expenses of

working capital loan

11,091,250.00 3 10,319,000.00 3

Runyang Bridge Lending of funds Interest expenses of

entrusted loan

42,031,000.00 11 12,860,925.00 4

Network Operation

Company


entrusted loan

12,381,666.67 3 8,131,593.75 2

Far East Shipping Lending of funds Interest expenses of

entrusted loan

3,011,666.67 1 3,715,716.67 1

Communications

Holding


entrusted loan

7,100,000.00 2 12,633,750.00 4

Taicang Container Lending of funds Interest expenses of

entrusted loan

4,716,666.67 1 1,987,500.00 1

Yanjiang Expressway Lending of funds Interest expenses of

entrusted loan

3,370,000.00 1 5,120,000.00 1

TongSha Port Lending of funds Interest expenses of

entrusted loan

1,243,333.33 1 380,000.00 1

Jinghu Expressway Lending of funds Interest expenses of

entrusted loan

690,000.00 1 3,645,000.00 1

— 196 —



30 September 2014


30 September 2013 (unaudited)

Related

Type of related

party transactions

Details of related


Proportion of the

amount of related

party transactions

to that of similar

transactions Amount

Proportion of the

amount of related

party transactions

to that of similar

transactions

(%) (%)

Lianxu Expressway Lending of funds Interest expenses of

entrusted loan

— — 4,487,500.00 1

Fenguan Expressway Lending of funds Interest expenses of

entrusted loan

— — 397,500.00 1

Sutong Bridge Lending of funds Interest expenses of

entrusted loan

— — 3,362,500.00 1

Railway Development Lending of funds Interest expenses of

entrusted loan

— — — —

Communications

Holdings


loans from a

related party

69,022,541.09 19 29,654,999.99 9

— 197 —



Related

Type of

related party

transactions

Details of related


Proportion of

the amount of

related party

transactions to

that of similar

transactions Amount

Proportion of

the amount of

related party

transactions to

that of similar

transactions Amount

Proportion of

the amount of

related party

transactions to

that of similar

transactions

(%) (%) (%)

Group Finance

Company


bank deposits

1,135,386.95 84 402,492.52 34 — —

Communications

Holdings


financial settlement

center

— — 363,831.14 30 1,643,702.42 73

Group Finance

Company

Lending of

funds

Interest expenses of


13,758,666.67 3 3,526,533.33 1 — —

Runyang Bridge Lending of

funds


entrusted loan

17,147,900.00 4 — — — —

Communications

Holdings

Lending of

funds


entrusted loan

16,845,000.00 4 50,496,880.56 10 30,902,708.33 7

Network

Operation

Company

Lending of

funds


entrusted loan

10,842,125.00 2 3,723,666.67 1 — —

Yanjiang

Expressway

Lending of

funds


entrusted loan

6,826,666.67 1 5,900,000.00 1 — —

Lianxu

Expressway

Lending of

funds


entrusted loan

5,983,333.33 1 2,600,000.00 1 — —

Far East

Shipping

Lending of

funds


entrusted loan

4,954,288.89 1 7,044,955.56 1 6,600,877.78 1

Jinghu

Expressway

Lending of

funds


entrusted loan

4,860,000.00 1 2,106,666.67 1 — —

— 198 —



Related

Type of

related party

transactions

Details of related


Proportion of

the amount of

related party

transactions to

that of similar

transactions Amount

Proportion of

the amount of

related party

transactions to

that of similar

transactions Amount

Proportion of

the amount of

related party

transactions to

that of similar

transactions

(%) (%) (%)

Sutong Bridge Lending of

funds


entrusted loan

4,483,333.33 1 1,750,000.00 1 — —

Taicang container Lending of

funds


entrusted loan

2,650,000.00 1 — — — —

TongSha Port Lending of

funds


entrusted loan

506,666.67 1 — — — —

Fenguan

Expressway

Lending of

funds


entrusted loan

530,000.00 1 95,000.00 1 — —

Railway

Development

Lending of

funds


entrusted loan

— — 1,514,266.67 1 — —

Ocean Shipping Lending of

funds


entrusted loan

— — — — 1,328,385.00 1

Kuailu Vehicle

Transport

Lending of

funds


entrusted loan

— — — — 616,550.00 1

Communications

Holding

Lending of

funds


loans from a

related party

51,244,719.17 11 12,021,500.00 2 — —

— 199 —


(3) Leases with related parties

Unit: RMB

Lease income

Name of

lessor

Name of

lessee

Type of

leased assets

Involve

amount

of the

leased assets

Leasing

begin date

Leasing

ending date

From 1 January

2014 to 30

September

2014

From 1 January

2013 to 30

September

2013

The basis for

determining

Lease income

Impact of

lease income

on Ningchang

Zhenli

(Unaudited)

Ningchang

Zhenli

Expressway

Petroleum

Company

Gas station

property

1,791,662.30 1 January

2011

31 December

2016

5,302,000.00 3,058,200.00 With the recovery

of the cost of

the leased asset

and Profit as the

basic principle,

at the same time

Considering the

effect of taxes

Not

significant

Lease income

Name of

lessor

Name of

lessee

Type of

leased

assets

Involve amount

of the leased

assets

Leasing

begin date

Leasing

ending date Year 2013 Year 2012 Year 2011

The basis for

determining

Lease income

Impact of

lease income

on Ningchang

Zhenli

Ningchang

Zhenli

Expressway

Petroleum

Company

Gas station

property

1,791,662.30 1 January

2011

31 December

2016

4,317,500.00 4,584,800.00 4,553,700.00 With the recovery

of the cost of

the leased asset

and Profit as the

basic principle,

at the same time

Considering the

effect of taxes

Not significant

— 200 —


(4) Guarantees with related parties

Guarantor Guaranteed party Guaranteed amount

Inception date

of guarantee

Maturity date

of guarantee

Whether execution

of guarantee has

been completed

Communications

Holdings Ningchang Zhenli 50,000,000.00 18/08/2005 18/08/2011 Completed

Communications


Communications


Communications


Communications


Communications


Communications


Communications


Communications


Communications


Communications


Communications


Communications


Communications


Communications


Communications


Communications


— 201 —



Inception date

of guarantee

Maturity date

of guarantee

Whether execution

of guarantee has

been completed

Communications


Communications


Communications


Communications


Communications

Holdings Ningchang Zhenli 50,000,000.00 26/04/2006 26/04/2015 Not completed

Communications


Communications


Communications


Communications


Communications


Communications


Communications


Communications


Communications


Communications


Communications


Communications


— 202 —



Inception date

of guarantee

Maturity date

of guarantee

Whether execution

of guarantee has

been completed

Communications


Communications


Communications


Communications


Communications


Communications


Communications


Communications


Communications


Communications


Communications


Communications


Communications


Communications


Communications


Communications


Communications


— 203 —



Inception date

of guarantee

Maturity date

of guarantee

Whether execution

of guarantee has

been completed

Communications


Communications


Communications


Communications


Communications


Communications


Communications


Communications


— 204 —


(5) Borrowings/loans with related parties

During the period from 1 January 2014 to 30 September 2014:

Unit: RMB

Related party

Amount due

to (refund) Inception date Maturity date

Amount at the

end of the period Remarks

Borrowed from:

Far East Shipping -50,000,000.00 15/03/2013 14/03/2014 — Entrusted loan with

annual interest rate

of 6.00%



of 6.00%



of 6.00%

Yanjiang

Expressway

50,000,000.00 17/07/2014 16/01/2015 50,000,000.00 Entrusted loan with


of 6.00%

Yanjiang

Expressway

-40,000,000.00 03/12/2013 02/06/2014 — Entrusted loan with


of 6.00%

Yanjiang

Expressway

50,000,000.00 16/01/2014 15/07/2014 — Entrusted loan with


of 6.00%

Yanjiang

Expressway



of 6.00%

Tong Sha Port 50,000,000.00 12/08/2014 11/08/2015 50,000,000.00 Entrusted loan with


of 6.00%

Tong Sha Port -20,000,000.00 12/08/2013 11/08/2014 — Entrusted loan with


of 6.00%

Taicang container 100,000,000.00 05/08/2014 04/08/2015 100,000,000.00 Entrusted loan with


of 6.00%

— 205 —


Unit: RMB

Related party

Amount due


Amount at the


Taicang container -100,000,000.00 05/08/2013 04/08/2014 — Entrusted loan with


of 6.00%

Runyang Bridge 600,000,000.00 18/02/2014 31/12/2023 600,000,000.00 Entrusted loan with


of 6.78%

Runyang Bridge — 26/02/2013 25/02/2019 300,000,000.00 Entrusted loan with


of 6.68%

Network Operation

Company



of 6.00%

Network Operation

Company

— 16/12/2013 15/12/2014 30,000,000.00 Entrusted loan with


of 6.00%

Network Operation

Company



of 6.15%

Network Operation

Company



of 6.00%

Network Operation

Company



of 6.00%

Network Operation

Company



of 6.00%

Network Operation

Company



of 6.00%

Network Operation

Company



of 6.00%

Network Operation

Company



of 6.00%

— 206 —


Unit: RMB

Related party

Amount due


Amount at the


Network Operation

Company



of 6.00%

Network Operation

Company



of 6.00%

Network Operation

Company



of 6.00%

Network Operation

Company



of 6.00%

Network Operation

Company



of 6.00%

Network Operation

Company



of 6.00%

Jinghu Expressway 20,000,000.00 18/03/2014 17/03/2015 20,000,000.00 Entrusted loan with


of 6.00%

Communications

Holdings

— 17/05/2013 17/05/2023 400,000,000.00 Loan from a related

party with annual

interest rate

of 5.90%

Communications

Holdings

350,000,000.00 22/08/2014 22/08/2017 350,000,000.00 Loan from a related

party with annual

interest rate

of 6.10%

Communications

Holdings


party with annual

interest rate

of 5.60%

— 207 —


Unit: RMB

Related party

Amount due


Amount at the


Communications

Holdings


party with annual

interest rate

of 6.10%

Communications

Holdings


party with annual

interest rate

of 6.39%

Communications

Holdings


party with annual

interest rate

of 6.10%

Communications

Holdings


party with annual

interest rate

of 6.60%

Communications

Holdings



of 6.00%

Communications

Holdings



of 6.00%

Communications

Holdings



of 6.00%

Communications

Holdings

-300,000,000.00 13/09/2013 13/03/2014 — Loan from a related

party with annual

interest rate

of 5.30%

Communications

Holdings

300,000,000.00 22/02/2014 22/05/2014 — Loan from a related

party with annual

interest rate

of 6.60%

— 208 —


Unit: RMB

Related party

Amount due


Amount at the


Communications

Holdings

200,000,000.00 26/03/2014 26/09/2014 — Loan from a related

party with annual

interest rate

of 5.55%

Communications

Holdings


party with annual

interest rate

of 6.60%

Communications

Holdings


party with annual

interest rate

of 5.55%

Group Finance

Company

60,000,000.00 18/03/2014 17/03/2015 60,000,000.00 Working capital loan

with annual interest

rate of 5.70%

Group Finance

Company



rate of 5.70%

Group Finance

Company



rate of 5.70%

Group Finance

Company

-50,000,000.00 12/10/2013 11/10/2014 30,000,000.00 Working capital loan


rate of 5.70%

Group Finance

Company

-50,000,000.00 13/03/2013 12/03/2014 — Working capital loan


rate of 5.70%

Group Finance

Company



rate of 5.70%

Group Finance

Company



rate of 5.70%

Lend to:

N/A

— 209 —


During the period of 1 January 2013 to 30 September 2013 (Unaudited):

Unit: RMB

Related party

Amount due


Amount at the


Borrowed from:

Far East Shipping 50,000,000.00 15/03/2013 14/03/2014 50,000,000.00 Entrusted loan


rate of 6.00%

Far East Shipping 10,000,000.00 19/03/2013 18/03/2014 10,000,000.00 Entrusted loan


rate of 6.00%

Far East Shipping -50,000,000.00 20/03/2012 20/03/2013 — Entrusted loan


rate of 7.22%

Far East Shipping -50,000,000.00 16/03/2012 16/03/2013 — Entrusted loan


rate of 7.22%

Yanjiang

Expressway

-200,000,000.00 18/07/2012 17/07/2013 — Entrusted loan


rate of 6.00%

Tong Sha Port 20,000,000.00 12/08/2013 11/08/2014 20,000,000.00 Entrusted loan


rate of 6.00%

Taicang container 100,000,000.00 05/08/2013 04/08/2014 100,000,000.00 Entrusted loan


rate of 6.00%

Sutong Bridge -100,000,000.00 28/09/2012 27/09/2013 — Entrusted loan


rate of 6.00%

Runyang Bridge 300,000,000.00 26/02/2013 25/02/2019 300,000,000.00 Entrusted loan


rate of 6.68%

Network Operation

Company

40,000,000.00 10/07/2013 09/07/2014 40,000,000.00 Entrusted loan


rate of 6.00%

Network Operation

Company

30,000,000.00 17/01/2013 16/01/2014 30,000,000.00 Entrusted loan


rate of 6.00%

— 210 —


Unit: RMB

Related party

Amount due


Amount at the


Network Operation

Company

30,000,000.00 12/08/2013 11/08/2014 30,000,000.00 Entrusted loan


rate of 6.00%

Network Operation

Company

30,000,000.00 28/05/2013 27/05/2015 30,000,000.00 Entrusted loan


rate of 6.15%

Network Operation

Company

20,000,000.00 18/04/2013 18/04/2014 20,000,000.00 Entrusted loan


rate of 6.00%

Network Operation

Company

20,000,000.00 21/05/2013 20/05/2014 20,000,000.00 Entrusted loan


rate of 6.00%

Network Operation

Company

20,000,000.00 08/08/2013 07/08/2014 20,000,000.00 Entrusted loan


rate of 6.00%

Network Operation

Company

-50,000,000.00 06/06/2012 06/06/2013 — Entrusted loan


rate of 6.56%

Network Operation

Company

-20,000,000.00 08/08/2012 07/08/2013 — Entrusted loan


rate of 6.00%

Network Operation

Company

-10,000,000.00 25/07/2012 24/07/2013 — Entrusted loan


rate of 6.00%

Network Operation

Company

-30,000,000.00 10/07/2012 09/07/2013 — Entrusted loan


rate of 6.00%

Lianxu Expressway -100,000,000.00 08/08/2012 07/08/2013 — Entrusted loan


rate of 6.00%

Lianxu Expressway 100,000,000.00 12/08/2013 11/09/2013 — Entrusted loan


rate of 6.00%

Lianxu Expressway -100,000,000.00 12/08/2013 11/09/2013 — Entrusted loan


rate of 6.00%

— 211 —


Unit: RMB

Related party

Amount due


Amount at the


Jinghu Expressway — 15/11/2012 15/11/2013 20,000,000.00 Entrusted loan


rate of 6.00%

Jinghu Expressway -100,000,000.00 18/09/2012 17/08/2013 — Entrusted loan


rate of 6.00%

Communications

Holdings


party with annual

interest rate

of 5.90%

Communications

Holdings


party with annual

interest rate

of 5.30%

Communications

Holdings


party with annual

interest rate

of 6.10%

Communications

Holdings


party with annual

interest rate

of 6.39%

Communications

Holdings

140,000,000.00 15/07/2013 14/07/2014 140,000,000.00 Entrusted loan


rate of 6.00%

Communications

Holdings

100,000,000.00 14/08/2013 13/08/2014 100,000,000.00 Entrusted loan


rate of 6.00%

Communications

Holdings

60,000,000.00 12/08/2013 11/08/2014 60,000,000.00 Entrusted loan


rate of 6.00%

Communications

Holdings

-230,000,000.00 14/08/2012 13/08/2013 — Entrusted loan


rate of 6.00%

— 212 —


Unit: RMB

Related party

Amount due


Amount at the


Fenguan

Expressway

— 15/11/2012 15/11/2013 10,000,000.00 Entrusted loan


rate of 6.00%

Group Finance

Company



rate of 5.70%

Group Finance

Company



rate of 5.70%

Group Finance

Company



rate of 5.70%

Group Finance

Company



rate of 6.56%

Group Finance

Company



rate of 6.00%

Group Finance

Company

50,000,000.00 17/01/2013 16/01/2014 — Working capital loan


rate of 5.70%

Lend to:

N/A

— 213 —


During the year 2013

Unit: RMB

Related party

Amount due


Amount at the

end of the year Remarks

Borrowed from:

Far East Shipping 50,000,000.00 15/03/2013 14/03/2014 50,000,000.00 Entrusted loan with

annual interest

rate of 6.00%


annual interest

rate of 6.00%


annual interest

rate of 6.00%


annual interest

rate of 7.22%


annual interest

rate of 7.22%

Yanjiang

Expressway


annual interest

rate of 6.00%

Yanjiang

Expressway


annual interest

rate of 6.00%

Tong Sha Port 20,000,000.00 12/08/2013 11/08/2014 20,000,000.00 Entrusted loan with

annual interest

rate of 6.00%

Taicang container 100,000,000.00 05/08/2013 04/08/2014 100,000,000.00 Entrusted loan with

annual interest

rate of 6.00%

Sutong Bridge -100,000,000.00 28/09/2012 27/09/2013 — Entrusted loan with

annual interest

rate of 6.00%

— 214 —


Unit: RMB

Related party

Amount due


Amount at the


Runyang Bridge 300,000,000.00 26/02/2013 25/02/2019 300,000,000.00 Entrusted loan with

annual interest

rate of 6.68%

Network Operation

Company


annual interest

rate of 6.00%

Network Operation

Company


annual interest

rate of 6.00%

Network Operation

Company


annual interest

rate of 6.00%

Network Operation

Company


annual interest

rate of 6.00%

Network Operation

Company


annual interest

rate of 6.15%

Network Operation

Company


annual interest

rate of 6.00%

Network Operation

Company


annual interest

rate of 6.00%

Network Operation

Company


annual interest

rate of 6.00%

Network Operation

Company


annual interest

rate of 6.00%

Network Operation

Company


annual interest

rate of 6.56%

Network Operation

Company


annual interest

rate of 6.00%

— 215 —


Unit: RMB

Related party

Amount due


Amount at the


Network Operation

Company


annual interest

rate of 6.00%

Network Operation

Company


annual interest

rate of 6.00%

Lianxu Expressway -100,000,000.00 08/08/2012 07/08/2013 — Entrusted loan with

annual interest

rate of 6.00%

Lianxu Expressway 100,000,000.00 12/08/2013 11/09/2013 — Entrusted loan with

annual interest

rate of 6.00%

Lianxu Expressway -100,000,000.00 12/08/2013 11/09/2013 — Entrusted loan with

annual interest

rate of 6.00%

Jinghu Expressway -20,000,000.00 15/11/2012 15/11/2013 — Entrusted loan with

annual interest

rate of 6.00%

Jinghu Expressway -100,000,000.00 18/09/2012 17/08/2013 — Entrusted loan with

annual interest

rate of 6.00%

Communications

Holdings


party with annual

interest rate

of 5.90%

Communications

Holdings


party with annual

interest rate

of 5.30%

Communications

Holdings


party with annual

interest rate

of 6.10%

— 216 —


Unit: RMB

Related party

Amount due


Amount at the


Communications

Holdings


party with annual

interest rate

of 6.39%

Communications

Holdings


annual interest

rate of 6.00%

Communications

Holdings


annual interest

rate of 6.00%

Communications

Holdings


party with annual

interest rate

of 6.60%

Communications

Holdings


annual interest

rate of 6.00%

Communications

Holdings


annual interest

rate of 6.00%

Fenguan

Expressway


annual interest

rate of 6.00%

Group Finance

Company



rate of 5.70%

Group Finance

Company



rate of 5.70%

Group Finance

Company



rate of 5.70%

Group Finance

Company



rate of 5.70%

— 217 —


Unit: RMB

Related party

Amount due


Amount at the


Group Finance

Company



rate of 6.56%

Group Finance

Company



rate of 6.00%

Group Finance

Company

50,000,000.00 17/01/2013 16/01/2014 — Working capital loan


rate of 5.70%

Group Finance

Company



rate of 5.70%

Lend to:

N/A

— 218 —



Unit: RMB

Related party

Amount due


Amount at the


Borrowed from:


annual interest

rate of 7.22%


annual interest

rate of 7.22%


annual interest

rate of 6.31%


annual interest

rate of 6.31%

Yanjiang

Expressway


annual interest

rate of 6.00%

Railway

Development


annual interest

rate of 6.56%

Railway

Development


annual interest

rate of 6.56%

Sutong Bridge 100,000,000.00 28/09/2012 27/09/2013 100,000,000.00 Entrusted loan with

annual interest

rate of 6.00%

Network Operation

Company


annual interest

rate of 6.56%

Network Operation

Company


annual interest

rate of 6.00%

— 219 —


Unit: RMB

Related party

Amount due


Amount at the


Network Operation

Company


annual interest

rate of 6.00%

Network Operation

Company


annual interest

rate of 6.00%

Lianxu

Expressway


annual interest

rate of 6.00%

Jinghu

Expressway


annual interest

rate of 6.00%

Jinghu

Expressway


annual interest

rate of 6.00%

Communications

Holdings


party with annual

interest rate

of 6.10%

Communications

Holdings


annual interest

rate of 6.00%

Communications

Holdings


party with annual

interest rate

of 6.39%

Communications

Holdings


annual interest

rate of 6.56%

Communications

Holdings


annual interest

rate of 6.56%

Communications

Holdings


annual interest

rate of 6.31%

— 220 —


Unit: RMB

Related party

Amount due


Amount at the


Communications

Holdings


annual interest

rate of 6.31%

Communications

Holdings


annual interest

rate of 6.56%

Communications

Holdings


annual interest

rate of 6.56%

Communications

Holdings


annual interest

rate of 6.56%

Communications

Holdings


annual interest

rate of 6.56%

Communications

Holdings


annual interest

rate of 6.56%

Communications

Holdings


annual interest

rate of 6.56%

Communications

Holdings


annual interest

rate of 6.56%

Communications

Holdings


annual interest

rate of 6.56%

— 221 —


Unit: RMB

Related party

Amount due


Amount at the


Communications

Holdings


annual interest

rate of 6.56%

Communications

Holdings


annual interest

rate of 6.56%

Fenguan

Expressway


annual interest

rate of 6.00%

Group Finance

Company



rate of 6.56%

Group Finance

Company



rate of 6.00%

Lend to:

N/A

— 222 —



Unit: RMB

Related party

Amount due


Amount at the


Borrowed from:


annual interest

rate of 5.31%


annual interest

rate of 5.31%


annual interest

rate of 6.31%


annual interest

rate of 6.31%

Kuailu Vehicle

transport


annual interest

rate of 5.31%

Ocean shipping -40,000,000.00 25/08/2010 25/08/2011 — Entrusted loan with

annual interest

rate of 5.04%

Communications

Holdings


annual interest

rate of 4.86%

Communications

Holdings


annual interest

rate of 5.10%

Communications

Holdings


annual interest

rate of 5.56%

Communications

Holdings


annual interest

rate of 6.56%

— 223 —


Unit: RMB

Related party

Amount due


Amount at the


Communications

Holdings


annual interest

rate of 6.56%

Communications

Holdings


annual interest

rate of 5.56%

Communications

Holdings


annual interest

rate of 6.56%

Communications

Holdings


annual interest

rate of 6.56%

Communications

Holdings


annual interest

rate of 6.31%

Communications

Holdings


annual interest

rate of 6.56%

Communications

Holdings


annual interest

rate of 6.31%

Communications

Holdings


annual interest

rate of 6.56%

Lend to:

N/A

— 224 —


(6) Compensation for key management personnel

Unit: RMB

Item

From 1 January

2014 to 30

September

From 1 January

2013 to 30

September Year 2013 Year 2012 Year 2011

(Unaudited)

Compensation for key

management

personnel 1,628,899.24 1,405,470.00 2,650,038.30 2,520,035.92 1,774,089.80

4. Amount due to and due from related parties

(1) Deposit in related parties

Unit: RMB

Related party

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Group Finance

Company 83,613,712.47 75,577,638.92 77,083,965.95 —

— 225 —


(2) Amount due from related parties

Unit: RMB


Item Related party

Carrying

amount Provision

Carrying

amount Provision

Carrying

amount Provision

Carrying

amount Provision

Accounts Receivables (Note) Expressway

Petroleum

Company

1,880,000.00 — 1,252,900.00 — 1,182,800.00 — 1,215,300.00 —

Sub total 1,880,000.00 — 1,252,900.00 — 1,182,800.00 — 1,215,300.00 —

Other Receivable Runyang Bridge — — 73,693.00 — 73,693.00 — 40,235.00 —

Communications

Holdings

— — — — — — 45,978,741.51 —

Sub total — — 73,693.00 — 73,693.00 — 46,018,976.51 —

Note: At 30 September 2014, 31 December 2013, 31 December 2013 and 31 December 2011, besides the accounts receivable of gas station lease from Expressway Petroleum Company stated above, there are split toll road fee receivables from Toll Road Network Companies which amounted to RMB15,125,110.69, RMB6,879,350.61, RMB7,740,439.51 and RMB9,679,138.78 in respect. The ultimate shareholder of those Toll Road Network Companies is Communications Holdings, except for which Ningchang Zhenli has no other control, joint control or significant influence relationship with them.

— 226 —


(3) Amount due to related parties

Unit: RMB

Item Related party

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Account Payables

(Note) Information Company 497,000.00 384,500.00 204,500.00 794,519.05

Network Operation

Company 1,055,607.20 198,450.00 144,996.00 125,689.00

Sundian 5,597,860.51 513,064.02 532,365.64 3,800,902.72

Huatong testing 16,545.46 395,545.46 379,000.00 —

Sub total 7,167,013.17 1,491,559.48 1,260,861.64 4,721,110.77

Other Payables Yangtze Bridge — — — 19,202.04

Interst payable

Group Finance

Company 2,937,027.78 2,529,327.78 1,796,116.67 —

Communications

Holdings 45,292,184.92 29,736,219.17 12,021,500.00 —

Sub total 48,229,212.70 32,265,546.95 13,817,616.67 —

Note: At 30 September 2014, 31 December 2013, 31 December 2012 and 31 December 2011, besides the accounts payable of Road maintenance fee, Communication system maintenance fee, Bridge inspection and maintenance fees, Network service fee, etc stated above, there are split toll road fee payables from Toll Road Network Companies which amounted to RMB3,689,797.00, RMB4,309,562.00, RMB36,228,114.00 and RMB2,352,785.00 in respect. The ultimate shareholder of those Toll Road Network Companies is Communications Holdings, except for which Ningchang Zhenli has no other control, joint control or significant influence relationship with them.

— 227 —


5. Directors’ emoluments


Unit: RMB

Item Director’s fee

Salaries and

other benefits

Basic pension

and annuity

scheme Total

Directors

Chen Xianghui — — — —

Meng Fanyang — 233,395.04 43,862.98 277,258.02

Chen Zhongyang — — — —

Lu Zhinong — — — —

Lin Chunhua — — — —

Xu Xiaoqin — — — —

Guan Hua — — — —

Li jian — — — —

Supervisers

Wu Zanping — — — —

Zhang Kangming — — — —

Ke Xiang — — — —

Wang Dongming — 161,481.50 18,487.50 179,969.00

Luo Xiaowu — 142,174.75 15,116.25 157,291.00

Total — 537,051.29 77,466.73 614,518.02

— 228 —



Unit: RMB


Salaries and

other benefits

Basic pension

and annuity

scheme Total

Directors


Meng Fanyang — 180,951.00 30,084.00 211,035.00







Supervisers




Wang Dongming — 166,278.00 22,236.00 188,514.00

Luo Xiaowu — 131,891.25 15,358.65 147,249.90

Total — 479,120.25 67,678.65 546,798.90

— 229 —


Year 2013

Unit: RMB


Salaries and

other benefits

Basic pension

and annuity

scheme Total

Directors


Meng Fanyang — 391,842.86 85,100.00 476,942.86







Supervisers




Wang Dongming — 246,251.00 47,025.00 293,276.00

Luo Xiaowu — 230,526.00 42,750.00 273,276.00

Total — 868,619.86 174,875.00 1,043,494.86

— 230 —


Year 2012

Unit: RMB


Salaries and

other benefits

Basic pension

and annuity

scheme Total

Directors


Meng Fanyang — 381,526.00 82,800.00 464,326.00

Chen Zhongyang

(Appointed on

7 July 2012) — — — —


Feng Baochun

(Retired on

7 July 2012) — — — —

Song Xiaoyun

(Retired on

7 July 2012) — — — —





Supervisers




Xu Tinyu

(Retired on

7 July 2012) — — — —

Wang Dongming

(Appointed on

7 July 2012) — 236,611.00 44,616.00 281,227.00

Luo Xiaowu

(Appointed on

7 July 2012) — 221,311.00 40,248.00 261,559.00

Total — 839,448.00 167,664.00 1,007,112.00

— 231 —


Year 2011

Unit: RMB


Salaries and

other benefits

Basic pension

and annuity

scheme Total

Directors

Ni Renjie (Retired on

9 December 2011) — — — —

Chen Xianghui

(Appointed on

9 December 2011) — — — —

Liu Bucun (Retired on

9 December 2011) — — — —

Zhai Gang (Retired on

9 December 2011) — — — —

Meng Fanyang

(Appointed on

9 December 2011) — 369,996.24 68,700.00 438,696.24

Feng Baochun

(Appointed on

9 December 2011) — — — —

Song Xiaoyun — — — —






Supervisers



Xu Tinyu — — — —


Total — 369,996.24 68,700.00 438,696.24

— 232 —


Note1: Some directors of Ningchang Zhenli were also the employees of the shareholders and their remuneration were paid for and borne by the shareholders during the Track Record Period. In the opinion of the directors of Ningchang Zhenli, there is no reasonable basis to allocate their remuneration to Ningchang Zhenli.

Note2: The seats of Ningchang Zhenli’s directors and supervisers have been changed from 9 to 8 and 4 to 5 respectively in July 2012.

6. Five individuals with the highest emoluments

Top five highest emoluments individuals are as follows. One (From 1 January to

September 2013: One; Year 2013: One; Year 2012: One; Year 2011: One) of the five

individuals with the highest emoluments in Ningchang Zhenli are directors of Ningchang

Zhenli whose emoluments are included in note of directors’ emoluments. The emoluments

of the remaining four (From 1 January to September 2013: Four; Year 2013: Four; Year

2012: Four; Year 2011: Four) individuals were as follows:

Unit: RMB

Item

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

Salaries and

other benefits 857,162.74 712,593.00 1,345,903.44 1,254,173.92 1,136,673.56

Basic pension and

annuity scheme 157,218.48 126,876.00 260,640.00 258,750.00 198,720.00

Total 1,014,381.22 839,469.00 1,606,543.44 1,512,923.92 1,335,393.56

Salary range

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

Less than

HKD 1,000,000 4 4 4 4 4

— 233 —


(X) SEGMENT REPORT

Based on the internal organization structure, management requirements and internal reporting

system, for above 90% of operating income comes from toll revenue, Ningchang Zhenli

recognizes toll road business and other business as the only one segment.

Segment information is disclosed in accordance with the accounting policies and measurement

criteria adopted by the segment when reporting to management. The measurement criteria are

consistent with the accounting and measurement criteria in the preparation of the Financial

Information.

(1) Segment information

For above 90% of operating income comes from toll revenue, the segment information

is consistent with the information in the statement of financial position and statement of

profit or loss and other comprehensive income.

(2) Segment revenue arising from external transactions by business

Details please refer to Note (VIII) 24.

(3) External revenue by geographical area of source and non-current assets by

geographical location

All income and assets of the Ningchang Zhenli are from/located in PRC.

(4) Degree of reliance on major customers

The principle activities are toll roads operation and ancillary services along toll roads etc.

Therefore there is no reliance on specific customers.

— 234 —


(XI) FINANCIAL INSTRUMENT AND RISK MANAGEMENT

Ningchang Zhenli’s major financial instruments include cash and bank balances, equity

investments, borrowings, accounts receivable, other receivables, accounts payable, other

payables etc. Details of these financial instruments are disclosed in notes VIII. The risks

associated with these financial instruments and the policies on how to mitigate these risks

are set out below. Management manages and monitors these exposures to ensure the risks are

monitored at a certain level.

1. Risk management objectives and policies

Ningchang Zhenli’s risk management objectives are to achieve a proper balance between

risks and yield, minimize the adverse impacts of risks on Ningchang Zhenli’s operation

performance, and maximize the benefits of the shareholders and other stakeholders.

Based on these risk management objectives, Ningchang Zhenli’s basic risk management

strategy is to identify and analyze Ningchang Zhenli’s exposure to various risks, establish

an appropriate maximum tolerance to risk, implement risk management, and monitors

regularly and effectively these exposures to ensure the risks are monitored at a certain

level.

1.1. Market Risk

1.1.1. Foreign Currency Risk

The management of Ningchang Zhenli considers that the major and

continuing transaction of Ningchang Zhenli are denominated and settled

in RMB, the currency risk may have no significant impact on Ningchang

Zhenli’s performance.

1.1.2. Interest rate risk — risk of changes in cash flows

Ningchang Zhenli’s cash flow interest rate risk of financial instruments

relates primarily to variable interest rate borrowings. Ningchang Zhenli’s

policy is to keep the variable interest rate. As at 30 September,2014,

borrowings with variable interest rate mainly include short-term

borrowings RMB0 (31 December 2013: RMB0; 31 December 2012:

RMB100,000,000.00; 31 December 2011: RMB100,000,000.00) and long-

term borrowings (including long-term borrowings due within one year)

RMB4,860,500,000.00 (31 December 2013: RMB4,877,600,000.00;

31 December 2012: RMB5,334,000,000.00; 31 December 2011:

RMB5,672,500,000.00).

— 235 —


Sensitivity analysis

The sensitivity analysis on interest rate risk is based on the following assumptions:

changes in the market interest rate may influence the interest income or expense of

the variable rate financial instruments. For variable-rate short-term and long-term

borrowings, the analysis is prepared assuming the amount of liability outstanding

at the end of the reporting period was outstanding for the whole year. A 50 basis

point increase or decrease is used and represents management’s assessment of the

reasonably possible change in interest rates.

If interest rates had been 50 basis points higher/lower where all other variables

were held constant, Ningchang Zhenli’s net profit during period 1 January 2014

to 30 September 2014, year 2013, year 2012 and year 2011 would decrease/

increase by RMB18,226,875.00, RMB24,388,000.00, RMB27,170,000.00 and

RMB28,862,500.00. This is mainly attributable to the Ningchang Zhenli’s exposure

to interest rates on its variable-rate borrowings.

1.2. Credit risk

At 30 September 2014, 31 December 2013, 31 December 2012, 31 and December

2011, Ningchang Zhenli ‘s maximum exposure to credit risk which will cause a

financial loss to Ningchang Zhenli due to failure to discharge an obligation by the

counterparties issued by Ningchang Zhenli is arising from the carrying amount of

the respective recognized financial assets as stated in the statement of financial

position.

In order to minimize the credit risk, the management of Ningchang Zhenli has

delegated a team responsible for determination of credit limits, credit approvals and

other monitoring procedures except highway toll business to ensure that follow-up

action is taken to recover overdue debts. In addition, Ningchang Zhenli reviews the

recoverable amount of each individual other debts at the end of the reporting period

to ensure that adequate impairment losses are made for irrecoverable amount. In

this regard, the directors of Ningchang Zhenli consider that Ningchang Zhenli’s

credit risk is significantly reduced.

— 236 —


Ningchang Zhenli’s floating capital is kept in bank with high credit ratings, so

credit risk of floating capital is low.

Ningchang Zhenli does not have financial assets that are overdue but not

depreciate.

At the end of each reporting period, for those account receivables of third party

with impairment individually, Ningchang Zhenli determines provision for bad debts

according to Ningchang Zhenli’s credit policy, current situation.

Ningchang Zhenli’s operating income is mainly from toll road income and ancillary

services income. Ningchang Zhenli’s risk exposure spread over a number of clients,

so Ningchang Zhenli does not exist significant credit concentration risk.

1.3. Liquidity risk

In the management of the liquidity risk, Ningchang Zhenli monitors and maintains

a level of cash and cash equivalents deemed adequate by the management to

finance Ningchang Zhenli’s operation and mitigate the effects of fluctuations in

cash flows. The management monitors the utilisation of bank borrowings and

ensures compliance with loan covenants. Ningchang Zhenli takes toll road income,

bank loans and loans from related parties as important source of working capital.

At 30 September 2014, the net current liabilities of Ningchang Zhenli accounted

RMB1,547,727,481.50. The main current liabilities included the entrusted loans

provided by Communications Holdings and its subsidiaries is RMB470,000,000.00,

short-term loans from non-bank financial institution provided by Group financial

Company is RMB195,000,000.00, and short-term bonds and private placement

bonds issued by Communications Holdings in which RMB600,000,000.00 is

allocated to Ningchang Zhenli.

— 237 —


Jiangsu Expressway plans to acquire the equity of Ningchang Zhenli from

Communications Holdings and other shareholders. Communications Holdings’s

management has agreed not to request repayment of outstanding balances owing

to it and its affiliated enterprises, to provide all necessary financial support to

Ningchang Zhenli in the foreseeable future so as to maintain the Ningchang

Zhenli’s ability to continue as a going concern before Communications Holdings

sold the equity in Ningchang Zhenli. Furthermore, management of Ningchang

Zhenli and Jiangsu Expressway promise that Jiangsu Expressway will succeed

Communications Holdings and its affiliated enterprise to become the above

debt’s owner and convert the debt into equity, or provide necessary financial

support to maintain the Ningchang Zhenli’s ability to continue as a going concern

after Jiangsu Expressway becomes the shareholder of Ningchang Zhenli. The

management of Ningchang Zhenli considers that the liquidity risk of Ningchang

Zhenli is greatly reduced through above measures.

Maturity analysis of financial liabilities Ningchang Zhenli holding is as follows

according to undiscounted remaining contractual obligations:

30 September 2014

Unit: RMB

Subject Within 1 months 2 to 3 months 3 to 12 months 1-5 years

More than

5 years

Accounts payable 8,359,161.46 4,825,219.40 15,849,400.52 — —

Other payables 5,760,725.29 46,406,459.27 — — —

Loans 50,088,916.67 266,847,461.22 1,679,391,488.46 3,645,583,948.46 4,115,153,541.01

Total 64,208,803.42 318,079,139.89 1,695,240,888.98 3,645,583,948.46 4,115,153,541.01

— 238 —


31 December 2013

Unit: RMB


More than

5 years

Accounts payable 26,309,844.93 364,269.48 11,300,381.26 — —

Other payables 5,883,799.94 — — — —

Loans 77,652,483.33 1,071,186,312.31 1,517,278,583.67 3,428,687,544.94 3,473,261,162.24

Total 109,846,128.20 1,071,550,581.79 1,528,578,964.93 3,428,687,544.94 3,473,261,162.24

31 December 2012

Unit: RMB


More than

5 years

Accounts payable 36,228,114.00 532,365.64 43,305,126.77 — —

Other payables 4,589,860.34 — — — —

Loans 179,273,000.83 400,901,276.98 1,889,177,728.63 3,181,596,133.93 3,990,976,623.20

Total 220,090,975.17 401,433,642.62 1,932,482,855.40 3,181,596,133.93 3,990,976,623.20

31 December 2011

Unit: RMB


More than

5 years

Accounts payable 2,352,785.00 3,800,902.72 81,179,373.43 — —

Other payables 4,825,341.40 — — — —

Loans 200,419,611.11 115,348,255.98 1,885,353,913.47 3,399,399,311.67 4,210,451,872.22

Total 207,597,737.51 119,149,158.70 1,966,533,286.90 3,399,399,311.67 4,210,451,872.22

— 239 —


(XII) CAPITAL MANAGEMENT

Ningchang Zhenli manage its capital to ensure Ningchang Zhenli will be able to continue as

going concern while maximizing the return to stakeholders through the optimization of the debt

and equity balance. Ningchang Zhenli’s overall strategy remains unchanged from 2011.

Ningchang Zhenli’s capital structure consist of debt which includes borrowings offset by cash

and bank balances as disclosed in Note (VIII) 1, 12, 18, 19 and stockholders’ equity (comprising

share capital, capital reserve and accumulated losses as disclosed in Note (VIII) 21 to 23).

Ningchang Zhenli is not subject to external mandatory capital management requirements.

Ningchang Zhenli manages and makes adjustment to capital structure according to economy

situation. Ningchang Zhenli makes adjustment to dividends of owner or obtains additional

capital from owner to maintain or adjust the capital structure. Ningchang Zhenli does not make

any adjustment on the objective, policy or process to capital management.

(XIII) FAIR VALUE

The Financial Information consists of equity instruments investment which is not quoted in

active markets. With no public market value, the fair value of the equity instruments investment

could not be reliably measured, therefore Ningchang Zhenli measures them at cost.

Furthermore, the directors consider that the carrying amounts of financial assets and financial

liabilities recorded at amortized cost in the Financial Information approximate their fair values.

— 240 —


(XIV) CONTINGENCIES

Ningchang Zhenli has no significant contingencies that need to be disclosed.

(XV) COMMITMENTS

Ningchang Zhenli has no significant commitments that need to be disclosed.

(XVI) SUBSEQUENT EVENTS

No significant events occurred subsequent to 30 September 2014 and up to the date of this

report.

(XVII) OTHER IMPORTANT MATTERS

1. Annuity scheme

The employees of Ningchang Zhenli are members of an annuity scheme which operated

by an independent third party. Ningchang Zhenli is required to contribute a specified

percentage of their payroll costs to the annuity scheme to fund the benefits. The only

obligation of Ningchang Zhenli with respect to the annuity scheme is to make the

specified contributions.

The total cost charged to the profit or loss during January 2014 to 30 September 2014

were RMB3,054,654.77 (From 1 January 2013 to 30 September 2013: RMB2,114,287.95;

2013: RMB3,710,664.00; 2012: RMB3,544,554.00; 2011: RMB2,535,422.00) which

represents contributions payable to these schemes by Ningchang Zhenli. All the

contributions had been paid over to the scheme as at the end of each reporting period.

— 241 —


2. Retirement benefits scheme

The employees of Ningchang Zhenli are members of a state-managed retirement pension

scheme operated by the local government. Ningchang Zhenli is required to contribute a

specified percentage of their payroll costs to the retirement pension scheme to fund the

benefits. The only obligation of Ningchang Zhenli with respect to the retirement pension

scheme is to make the specified contributions.



2013: RMB9,113,631.35; 2012: RMB7,932,095.13; 2011: RMB7,631,997.23) which

represents contributions payable to these schemes by Ningchang Zhenli. All the

contributions had been paid over to the scheme as at the end of each reporting period.

3. Net current liabilities /Total assets less current liabilities

Unit: RMB

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Current assets 127,826,573.28 103,148,309.76 120,857,103.98 86,073,865.53

Total assets 7,684,027,507.80 7,888,040,842.02 8,155,637,847.02 8,338,390,222.27

Less: current liabilities 1,675,554,054.78 2,359,094,003.36 2,161,519,217.05 1,883,681,250.24

Net current liabilities -1,547,727,481.50 -2,255,945,693.60 -2,040,662,113.07 -1,797,607,384.71

Total assets less

current liabilities 6,008,473,453.02 5,528,946,838.66 5,994,118,629.97 6,454,708,972.03

— 242 —


4. Net profit for the year deducted from the following:

Unit: RMB

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

The basic pension insurance

and annuity payment 10,204,181.17 9,433,959.95 12,824,295.35 11,476,649.13 10,167,419.23

Other employee benefits

(including directors’

emoluments) 51,752,894.49 46,529,021.20 85,393,082.95 81,241,508.95 71,042,210.77

Total employee benefits 61,957,075.66 55,962,981.15 98,217,378.30 92,718,158.08 81,209,630.00

Auditor’s remuneration 160,000.00 150,000.00 150,000.00 140,000.00 133,000.00

Depreciation and amortization

(Included in operating costs

and administrative expenses) 251,902,961.34 193,228,208.09 262,455,762.15 232,441,613.98 171,406,924.38

Losses (gain) on disposal

of non-current assets 278,838.46 -1,675,968.52 -1,675,968.52 1,476,810.07 —

B. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by Ningchang Zhenli subsequent to 30

September 2014 and up to the date of this report.

Yours faithfully,

Deloitte Touche Tohmatsu Certified Public Accountants LLP

Shanghai, China

— 243 —

APPENDIX IIB ACCOUNTANTS’ REPORT ON XIYI COMPANY

The following is the text of a report in respect of Xiyi Company from Deloitte Touche Tohmatsu

Certified Public Accountants LLP, the reporting accountants, prepared for the purpose of

incorporation in this circular.


Deloitte Touche Tohmatsu Certi�ed Public Accountants LLP30/F Bund Center222 Yan An Road EastShanghai 200002, PRC

23 January 2015

The Directors


Dear Sirs,

We set out below our report on the financial information (the “Financial Information”) of 江蘇錫宜高速公路有限公司 (Jiangsu Xiyi Expressway Company Limited, English translation for identification

purpose, referred to as “Xiyi Company”) for each of the three years ended 31 December 2011, 2012,

2013 and nine months ended 30 September 2014 ( the “Track Record Period”) for inclusion in the

circular of Jiangsu Expressway Company Limited (“Jiangsu Expressway”) dated 23 January 2015

(the “Circular”) issued in connection with the proposed acquisition of Xiyi Company by Jiangsu

Guangjing Xicheng Expressway Company Limited (“Guangjing Xicheng”), a subsidiary of Jiangsu

Expressway.

Xiyi Company was established in the People’s Republic of China (the “PRC”) on 11 September 2000.

The registered and paid-up capital of Xiyi Company is RMB824,170,000. Xiyi Company is engaged in

construction, operation and management of the Xiyi Expressway, Luma Highway and Wuxi Huantaihu

Expressway and the provision of other supporting services along the toll roads.

Xiyi Company adopts 31 December as the financial year end date. The statutory financial statements

of Xiyi Company were prepared in accordance with the relevant accounting policies and financial

regulations applicable to enterprises established in the PRC. The statutory financial statements of Xiyi

Company for the year ended 31 December 2013 was audited by Zhongxinghua Fuhua Certified Public

Accountants Co., Ltd. (“中興華富華會計師事務所有限公司”). The statutory financial statements

of Xiyi Company for the years ended 31 December 2011 and 2012 were audited by Jiangsu Fuhua

Accountants Co., Ltd. (“江蘇富華會計師事務所有限公司”).

— 244 —


For the purpose of the preparation of this report, the directors of Xiyi Company have prepared the

financial statements of Xiyi Company for the Track Record Period in accordance with the Accounting

Standards for Business Enterprises (“ASBE”) issued by the China Ministry of Finance (“MOF”) (the

“Underlying Financial Statements”). We have undertaken an independent audit on the Underlying

Financial Statements in accordance with International Standards on Auditing (“ISA”) issued by the

International Auditing and Assurance Standards Board (“IAASB”). We have examined the Financial

Information in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting

Accountant” issued by the Hong Kong Institute of Certified Public Accountants.

The Financial Information set out in this report has been prepared from the Underlying Financial

Statements and in accordance with the accounting policies set out in Note IV of Section A below.

The preparation of the Underlying Financial Statements is the responsibility of the directors of Xiyi

Company. No adjustments were considered necessary to the Underlying Financial Statements in

the preparation of the Financial Information for inclusion in the Circular. The directors of Jiangsu

Expressway are responsible for the contents of the Circular in which this report is included. It is our

responsibility to compile the Financial Information set out in this report from the Underlying Financial

Statements, to form an independent opinion on the Financial Information and to report our opinion to

you.

In our opinion, on the basis of preparation set out in Note II of Section A, the Financial Information

gives, for the purpose of this report, a true and fair view of the state of affairs of Xiyi Company as at

31 December 2011, 31 December 2012, 31 December 2013, and 30 September 2014 and of the results

and cash flows of Xiyi Company for the Track Record Period.

The comparative statement of profit or loss and other comprehensive income, statement of changes in

equity and statement of cash flows of Xiyi Company for the nine months ended 30 September 2013

together with the notes thereon (the “September 2013 Financial Information”) have been extracted

from Xiyi Company’s unaudited financial statements for the same period (the “September 2013

Underlying Financial Statements”) which were prepared by the directors of Xiyi Company solely for

the purpose of this report.

We conducted our review of the September 2013 Financial Information in accordance with the

International Standard on Review Engagements 2410 “Review of Interim Financial Information

Performed by the Independent Auditor of the Entity” issued by the IAASB. Our review of the

September 2013 Financial Information consists of making enquiries, primarily of persons responsible

for financial and accounting matters, and applying analytical and other review procedures. A review

is substantially less in scope than an audit conducted in accordance with International Standards on

Auditing and consequently does not enable us to obtain assurance that we would become aware of

all significant matters that might be identified in an audit. Accordingly, we do not express an audit

opinion on the September 2013 Financial Information.

— 245 —


Based on our review, nothing has come to our attention that causes us to believe that the September

2013 Financial Information is not prepared, in all material respects, in accordance with the accounting

policies consistent with those used in the preparation of the Financial Information which conform with

ASBE.

A. FINANCIAL INFORMATION

STATEMENT OF FINANCIAL POSITION

Unit: RMB

Item Notes (VIII)

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Current Assets:

Cash and bank balances 1 45,946,715.49 24,048,313.11 67,937,066.35 10,839,693.69

Accounts receivable 2 3,881,925.54 3,525,984.99 3,679,991.65 3,137,270.00

Prepayments 3 342,486.74 192,341.30 216,521.74 281,398.98

Other receivables 4 532,566.54 1,255,319.15 1,221,725.55 99,987,500.46

Inventories 5 219,270.80 262,088.48 255,219.42 196,770.59

Total Current Assets 50,922,965.11 29,284,047.03 73,310,524.71 114,442,633.72

Non-current Assets:

Available-for-sale

financial assets 6 11,230,000.00 11,230,000.00 8,150,000.00 8,150,000.00

Fixed assets 7 105,038,276.38 117,150,955.93 121,904,659.46 80,757,090.70

Construction in progress 8 510,000.00 — 6,152,105.00 1,220,220.00

Intangible assets 9 2,299,508,729.42 2,349,971,640.75 2,401,834,810.39 2,439,726,305.28

Deferred tax assets 10 — — — —

Total Non-current Assets 2,416,287,005.80 2,478,352,596.68 2,538,041,574.85 2,529,853,615.98

TOTAL ASSETS 2,467,209,970.91 2,507,636,643.71 2,611,352,099.56 2,644,296,249.70

— 246 —


Unit: RMB

Item Notes (VIII)

30 September

2014

31 December

2013

31 December

2012

31 December

2011


Short-term borrowings 12 615,000,000.00 665,000,000.00 605,000,000.00 690,000,000.00

Accounts payable 13 5,632,058.32 10,926,488.12 44,170,888.90 10,039,498.37

Receipts in advance 190,536.40 110,000.00 50,000.00 50,000.00

Employee benefits payable 14 1,785,895.81 1,040,580.06 642,445.22 702,864.48

Taxes payable 15 922,642.79 1,386,949.76 1,359,060.54 1,242,430.59

Other payables 16 23,850,936.58 4,834,127.61 3,213,255.80 3,318,275.79

Interest payable 17 28,461,143.27 14,560,508.95 4,135,720.84 3,930,941.67


due within one year 18 20,000,000.00 285,000,000.00 245,000,000.00 209,000,000.00

Total Current Liabilities 695,843,213.17 982,858,654.50 903,571,371.30 918,284,010.90


Long-term borrowings 19 1,112,000,000.00 862,000,000.00 1,017,000,000.00 1,014,000,000.00

Total Non-current liabilities 1,112,000,000.00 862,000,000.00 1,017,000,000.00 1,014,000,000.00

TOTAL LIABILITIES 1,807,843,213.17 1,844,858,654.50 1,920,571,371.30 1,932,284,010.90


Share capital 20 824,170,000.00 824,170,000.00 824,170,000.00 824,170,000.00

Accumulated losses 21 -164,803,242.26 -161,392,010.79 -133,389,271.74 -112,157,761.20

Total Shareholders’ Equity 659,366,757.74 662,777,989.21 690,780,728.26 712,012,238.80

TOTAL LIABILITIES

AND SHAREHOLDERS’

EQUITY 2,467,209,970.91 2,507,636,643.71 2,611,352,099.56 2,644,296,249.70

— 247 —


STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Unit: RMB

Item Notes (VIII)

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

1. Total operating income 22 207,628,412.15 194,668,404.02 262,743,135.21 252,145,281.45 259,495,935.73

Less: Operating costs 22 111,266,892.07 100,661,127.74 149,253,539.20 125,545,857.44 127,316,081.65

Business taxes

and levies 23 6,968,403.78 6,536,350.25 8,829,569.44 8,549,012.92 8,831,881.98

Administrative

expenses 24 8,981,939.46 8,353,606.21 13,067,233.39 13,214,566.20 12,080,019.66

Financial expenses 25 83,249,267.94 88,516,332.25 119,575,673.71 124,954,484.82 117,512,144.87

2. Operating profit (loss) -2,838,091.10 -9,399,012.43 -27,982,880.53 -20,118,639.93 -6,244,192.43

Add: Non-operating

income 26 67,792.00 78,033.00 994,159.52 1,033,178.14 1,351,581.48

Less: Non-operating

expenses 27 640,932.37 1,071,084.00 1,012,873.96 2,132,622.74 1,810,344.53

Including: Losses

from

disposal

of non-

current

assets 35,255.81 — 70,639.07 196,119.50 20,988.70

3. Total profit (loss) -3,411,231.47 -10,392,063.43 -28,001,594.97 -21,218,084.53 -6,702,955.48

Less: Income tax expenses 28 — — 1,144.08 13,426.01 —

4. Net profit (loss) -3,411,231.47 -10,392,063.43 -28,002,739.05 -21,231,510.54 -6,702,955.48

5. Net other comprehensive

income — — — — —

6. Total comprehensive

income -3,411,231.47 -10,392,063.43 -28,002,739.05 -21,231,510.54 -6,702,955.48

— 248 —


STATEMENT OF CASH FLOWS

Unit: RMB

Item Notes (VIII)

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

1. Cash Flows from

Operating Activities:

Cash receipts from

the sale of goods and

the rendering of service 207,353,008.00 191,206,695.10 262,957,141.87 251,602,559.80 259,816,584.73





Cash payments for goods

purchased and services

received 22,846,855.69 20,806,014.91 31,450,731.08 24,523,816.76 23,391,376.84

Cash payments to and

on behalf of employees 36,690,831.23 32,688,157.93 51,531,248.57 46,605,917.03 42,557,094.13

Payments of various

types of taxes 7,432,710.75 6,919,402.61 8,802,824.30 8,445,808.98 9,216,175.81

Other cash payments relating




Net Cash Flow from

Operating Activities 32 158,245,393.38 129,065,690.27 169,110,376.75 169,400,242.56 176,030,977.94

— 249 —


Unit: RMB

Item Notes (VIII)

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

2. Cash Flows from

Investing Activities:

Cash receipts from disposals

and recovery of investments 11,177.00 — 35,700.00 12,733,366.35 18.00


from investing activities 11,177.00 — 35,700.00 12,733,366.35 18.00

Cash payments to acquire or

construct fixed assets,

intangible assets and

other long-term assets 1,720,515.00 39,416,919.50 46,303,465.90 39,647,359.35 26,069,969.87

Cash payments to

acquire investments — 3,080,000.00 3,080,000.00 — —


from investing activities 1,720,515.00 42,496,919.50 49,383,465.90 39,647,359.35 26,069,969.87

Net Cash Flow used in

Investing Activities -1,709,338.00 -42,496,919.50 -49,347,765.90 -26,913,993.00 -26,069,951.87

— 250 —


Unit: RMB

Item Notes (VIII)

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

3. Cash Flows from

Financing Activities:

Cash receipts from borrowings 705,000,000.00 1,285,000,000.00 1,355,000,000.00 1,065,000,000.00 940,000,000.00

Other cash receipts related

to financing activities 31 — — — 87,378,664.51 —


from financing activities 705,000,000.00 1,285,000,000.00 1,355,000,000.00 1,152,378,664.51 940,000,000.00

Cash repayment of borrowings 770,000,000.00 1,290,000,000.00 1,410,000,000.00 1,111,000,000.00 912,000,000.00

Cash payments for distribution

of dividends or profits or

settlement of interest expenses 69,637,653.00 72,636,269.85 108,651,364.09 126,767,541.41 119,963,072.00

Other cash payments related

to financial activities 31 — — — — 66,806,151.92


from financing activities 839,637,653.00 1,362,636,269.85 1,518,651,364.09 1,237,767,541.41 1,098,769,223.92

Net Cash Flow used in

Financing Activities -134,637,653.00 -77,636,269.85 -163,651,364.09 -85,388,876.90 -158,769,223.92

4. Net Increase (decrease) in

Cash and Cash Equivalents 21,898,402.38 8,932,500.92 -43,888,753.24 57,097,372.66 -8,808,197.85

Add: Opening balance

of Cash and Cash

Equivalents 24,048,313.11 67,937,066.35 67,937,066.35 10,839,693.69 19,647,891.54

5. Closing Balance of Cash and

Cash Equivalents 45,946,715.49 76,869,567.27 24,048,313.11 67,937,066.35 10,839,693.69

— 251 —


STATEMENT OF CHANGES IN EQUITY

Unit: RMB


Item Share capital Capital reserve

Accumulated

losses

Total Owners’

Equity

1. Balance at 1 January 2014 824,170,000.00 — -161,392,010.79 662,777,989.21



3. Balance at 30 September 2014 824,170,000.00 — -164,803,242.26 659,366,757.74



Accumulated

losses

Total owners’

equity




3. Balance at 30 September 2013 824,170,000.00 — -143,781,335.17 680,388,664.83

Year 2013

Item Share capital

Capital

reserve

Accumulated

losses

Total owners’

equity




3. Balance at 31 December 2013 824,170,000.00 — -161,392,010.79 662,777,989.21

— 252 —


Year 2012


Accumulated

losses

Total owners’

equity





Year 2011


Accumulated

losses

Total owners’

equity





(I) GENERAL INFORMATION

Xiyi Company is a limited company incorporated in Wuxi, Jiangsu province on 11 September

2000 with registered capital of RMB824,170,000.00 when established, in which Jiangsu

Communications Holdings Company Limited contributed RMB646,170,000.00 accounting for

78% of the registered capital; Wuxi Expressway Investment Company Limited contributed

RMB138,250,000.00 accounting for 17% of the registered capital; Changzhou Expressway

Investment and Development Company Limited contributed 39,750,000.00 accounting for

5% of the registered capital. Xiyi Company gets the business with the registration number

20200000011273.

Xiyi Company is engaged in construction, operation and management of Xiyi Expressway,

Luma Highway and Wuxi Huantaihu Expressway and the provision of other supporting services

along the toll roads.

Jiangsu Communications Holdings Company Limited (“Communications Holdings”) is both

the parent company and the ultimate holding company of Xiyi Company.

— 253 —


(II) BASIS OF PREPARATION OF FINANCIAL INFORMATION

Xiyi Company has adopted the ASBE issued by the MOF, and applied the new and revised

ASBE that has been issued in 2014, which include ASBE No. 39 – Fair Value Measurement,

ASBE No. 40 – Joint Arrangements, ASBE No. 41 – Disclosure of Interests in Other Entities,

revised ASBE No. 2 – Long-term Equity Investment, ASBE No. 9 – Employee Benifits,

ASBE No. 30 – Presentation of Financial Statements, ASBE No. 33 – Consolidated Financial

Statements, ASBE No. 37 – Presentation of Financial Instruments. The purpose of this Financial

Information is for the proposed Guangjing Xicheng acquisition of Xiyi Company, therefore, this

Financial Information is prepared according to above mentioned ASBE since 1 January 2011.

Xiyi Company has disclosed relevant Financial Information in accordance with Information

Disclosure and Presentation Rules for Companies Making Public Offering Securities to the

Public No. 15 – General Provisions on Financial Reporting (Revised in 2010).

In addition, the Financial Information includes applicable disclosures required by the Rules

Governing the Listing of Securities on The Stock Exchange of Hong Kong Listed and the

Hong Kong Companies Ordinance which for the Track Record Period continue to be those of

the predecessor Companies Ordinance (Cap. 32), in accordance with transitional and saving

arrangements for Part 9 of the Hong Kong Companies Ordinance (Cap. 622), “Accounts and

Audit”, which are set out in sections 76 to 87 of Schedule 11 of the Ordinance.

Going Concern

As at 30 September 2014, Xiyi Company had total current liabilities in excess of total current

assets of RMB644,920,248.06 and total accumulated losses RMB164,803,242.26. The main

current liabilities included the entrusted loan provided by Communications Holdings and its

affiliated enterprises through bank is RMB235,000,000.00; borrowings from non-bank financial

institution provided by Jiangsu Communications Holdings Group Finance Company Limited

is RMB180,000,000.00; and short-term bonds issued by Communications Holdings in which

RMB200,000,000.00 is allocated to Xiyi Company.

Guangjing Xicheng plans to acquire Xiyi Company from Communications Holdings and other

shareholders. Communications Holdings’ management has agreed not to request repayment of

outstanding balances owing to it and its affiliated enterprises, to provide all necessary financial

support to Xiyi Company in the foreseeable future so as to maintain the Xiyi Company’s

ability to continue as a going concern before Communications Holdings sold the equity in Xiyi

Expressway. Furthermore, management of Guangjing Xicheng promises that Guangjing Xicheng

will fulfill the obligation to repay the debts and maintain the going concern of Xiyi Company’s

original business after the merge. Hence, the Financial Information has been prepared on a

going concern basis.

— 254 —


(III) THE STATEMENT OF COMPLIANCE WITH THE ACCOUNTING STANDARDS

FOR ENTERPRISES

The Financial Information of Xiyi Company has been prepared in accordance with ASBE, and

present truly and completely, Xiyi Company’s financial position as of 30 September 2014, 31

December 2013, 31 December 2012 and 31 December 2011, and Xiyi Company’s results of

operation and cash flows for the period from 1 January 2014 to 30 September 2014, the period

from 1 January 2013 to 30 September 2013, year 2013, 2012 and 2011.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES

1. Accounting period

Xiyi Company has adopted the calendar year as its accounting year, i.e. from 1 January to

31 December. The most recently presented period is from1 January 2014 to 30 September

2014.

2. Functional currency

Renminbi (“RMB”) is the currency of the primary economic environment in which Xiyi

Company operates. Therefore, Xiyi Company chooses RMB as their functional currency.

3. Basis of accounting and principle of measurement

Xiyi Company has adopted the accrual basis of accounting. Except for certain financial

instruments which are measured at fair value, Xiyi Company adopts the historical cost

as the principle of measurement in the Financial Information. Where assets are impaired,

provisions for asset impairment are made in accordance with relevant requirements.

Under the historical cost measurement, assets are recorded at the amount of cash or cash

equivalents paid or the fair value of the consideration given to acquire them at the time of

their acquisition; liabilities are carried at the amount of the proceeds or assets received in

exchange for the obligation or at the amounts of cash or cash equivalents expected to be

paid to satisfy the liability in the normal course of business.

Fair value is the price that would be received to sell an asset or paid to transfer a liability

in an orderly transaction between market participants at the measurement date, regardless

of whether that price is directly observable or estimated using another valuation

technique. Fair value for measurement and/or disclosure purposes in Xiyi Company’s

Financial Information is determined on such a basis.

— 255 —


Fair value measurements are categorized into Level 1, 2 or 3 based on the degree to

which the inputs to the fair value measurements are observable and the significance of the

inputs to the fair value measurement in its entirety, which are described as follows:

Level 1: inputs are unadjusted quoted prices in active markets for identical assets of

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.

4. Cash and cash equivalents

Cash comprises cash on hand and deposits that can be readily withdrawn on demand.

Cash equivalents are Xiyi Company’s short-term, highly liquid investments that are

readily convertible to known amounts of cash and which are subject to an insignificant

risk of changes in value.

5. Financial instruments

Financial assets and financial liabilities are recognized when Xiyi Company becomes

a party to the contractual provisions of the instrument. Financial assets and financial

liabilities are initially measured at fair value. For financial assets and financial liabilities

at fair value through profit or loss, transaction costs are immediately recognized in profit

or loss. For other financial assets and financial liabilities, transaction costs are included in

their initial recognized amounts.

5.1 Effective interest method

The effective interest method is a method of calculating the amortized cost of a

financial asset or a financial liability (or a group of financial assets or financial

liabilities) and of allocating the interest income or interest expense over the

relevant period, using the effective interest rate. The effective interest rate is the

rate that exactly discounts estimated future cash flows through the expected life of

the financial asset or financial liability or, where appropriate, a shorter period to

the net carrying amount of the financial asset or financial liability.

— 256 —


When calculating the effective interest rate, Xiyi Company estimates future cash

flows considering all contractual terms of the financial asset or financial liability

(without considering future credit losses), and also considers all fees paid or

received between the parties to the contract giving rise to the financial asset and

financial liability that are an integral part of the effective interest rate, transaction

costs, and premiums or discounts, etc.

5.2 Classification, recognition and measurement of financial assets

On initial recognition, the financial assets are classified into one of the four

categories, including financial assets at fair value through profit or loss, held-

to-maturity investments, loans and receivables, and available-for-sale financial

assets. All regular way purchases or sales of financial assets are recognized

and derecognized on a trade date basis. Xiyi Company’s financial assets mainly

represent loans and receivables and available-for-sale financial assets.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable

payments that are not quoted in an active market. Financial assets classified

as loans and receivables by Xiyi Company include notes receivable, accounts

receivable, dividends receivable and other receivables.

Loans and receivables are subsequently measured at amortized cost using the

effective interest method. Gain or loss arising from derecognition, impairment or

amortization is recognized in profit or loss.

Available-for-sale financial assets

Available-for-sale financial assets include non-derivative financial assets that are

designated on initial recognition as available for sale, and financial assets that

are not classified as financial assets at fair value through profit or loss, loans and

receivables or held-to-maturity investments.

Available-for-sale financial assets are subsequently measured at fair value, and

gains or losses arising from changes in the fair value are recognized as other

comprehensive income and included in the capital reserve, except that impairment

losses and exchange differences related to amortized cost of monetary financial

assets denominated in foreign currencies are recognized in profit or loss, until the

financial assets are derecognized, at which time the gains or losses are released and

recognized in profit or loss.

— 257 —


Interests obtained and the dividends declared by the investee during the period in

which the available-for-sale financial assets are held, are recognized in investment

gains.

For investments in equity instruments that do not have a quoted market price in

an active market and whose fair value cannot be reliably measured, and derivative

financial assets that are linked to and must be settled by delivery of such unquoted

equity instruments, they are measured at cost.

5.3 Impairment of financial assets

Xiyi Company assesses at the end of each reporting period the carrying amounts

of financial assets other than those at fair value through profit or loss. If there is

objective evidence that a financial asset is impaired, Xiyi Company determines

the amount of any impairment loss. Objective evidence that a financial asset is

impaired is evidence that, arising from one or more events that occurred after the

initial recognition of the asset, the estimated future cash flows of the financial

asset, which can be reliably measured, have been affected.

Objective evidence that a financial asset is impaired includes the following

observable events:

(1) Significant financial difficulty of the issuer or obligor;

(2) A breach of contract by the borrower, such as a default or delinquency in

interest or principal payments;

(3) Xiyi Company, for economic or legal reasons relating to the borrower’s

financial difficulty, granting a concession to the borrower;

(4) It becoming probable that the borrower will enter bankruptcy or other

financial reorganizations;

(5) The disappearance of an active market for that financial asset because of

financial difficulties of the issuer;

— 258 —


(6) Upon an overall assessment of a group of financial assets, observable data

indicates that there is a measurable decrease in the estimated future cash

flows from the group of financial assets since the initial recognition of those

assets, although the decrease cannot yet be identified with the individual

financial assets in the group. Such observable data includes:

— Adverse changes in the payment status of borrower in the group of

assets;

— Economic conditions in the country or region of the borrower which

may lead to a failure to pay the group of assets;

(7) Significant adverse changes in the technological, market, economic or legal

environment in which the equity instrument issuer operates, indicating that

the cost of the investment in the equity instrument may not be recovered by

the investor;

(8) A significant or prolonged decline in the fair value of an investment in an

equity instrument below its cost;

(9) Other objective evidence indicating there is an impairment of a financial

asset.

— Impairment of financial assets measured at amortised cost

If financial assets carried at amortized cost are impaired, the carrying

amounts of the financial assets are reduced to the present value of estimated

future cash flows (excluding future credit losses that have not been incurred)

discounted at the financial asset’s original effective interest rate. The

amount of reduction is recognized as an impairment loss in profit or loss.

If, subsequent to the recognition of an impairment loss on financial assets

carried at amortized cost, there is objective evidence of a recovery in value

of the financial assets which can be related objectively to an event occurring

after the impairment is recognized, the previously recognized impairment

loss is reversed. However, the reversal is made to the extent that the carrying

amount of the financial asset at the date the impairment is reversed does not

exceed what the amortized cost would have been had the impairment not

been recognized.

— 259 —


For a financial asset that is individually significant, Xiyi Company assesses

the asset individually for impairment. For a financial asset that is not

individually significant, Xiyi Company assesses the asset individually for

impairment or includes the asset in a group of financial assets with similar

credit risk characteristics and collectively assesses them for impairment. If

Xiyi Company determines that no objective evidence of impairment exists

for an individually assessed financial asset (whether significant or not),

it includes the asset in a group of financial assets with similar credit risk

characteristics and collectively reassesses them for impairment. Assets for

which an impairment loss is individually recognized are not included in a


— Impairment of available-for-sale financial assets

When an available-for-sale financial asset is impaired, the cumulative loss

arising from decline in fair value previously recognized directly in capital

reserve is reclassified from the capital reserve to profit or loss. The amount

of the cumulative loss that is reclassified from capital reserve to profit or

loss is the difference between the acquisition cost (net of any principal

repayment and amortization) and the current fair value, less any impairment

loss on that financial asset previously recognized in profit or loss.

If subsequent to the recognition of an impairment loss on available-for-sale

financial assets, there is objective evidence of a recovery in value of the

financial assets which can be related objectively to an event occurring after

the impairment is recognized, the previously recognized impairment loss is

reversed. The amount of reversal of impairment loss on available-for-sale

equity instruments is recognized as other comprehensive income, while the

amount of reversal of impairment loss on available-for-sale debt instruments

is recognized in profit or loss.

— 260 —


5.4 Classification, recognition and measurement of financial liabilities

Financial instruments or components of financial instruments issued by Xiyi

Company are classified into financial liabilities or equity on the basis of the

substance of the contractual arrangements of the financial instruments issued and

definitions of financial liability and equity instrument on initial recognition.

On initial recognition, financial liabilities are classified into financial liabilities

at fair value through profit or loss and other financial liabilities. Xiyi Company’s

financial liabilities mainly represent other financial liabilities.

5.4.1 Other financial liabilities

Other financial liabilities are subsequently measured at amortized cost using

the effective interest method, with gain or loss arising from derecognition or

amortization recognized in profit or loss.

5.5 Derecognition of financial liabilities

Xiyi Company derecognizes a financial liability (or part of it) only when the

underlying present obligation (or part of it) is discharged. An agreement between

Xiyi Company (an existing borrower) and an existing lender to replace the original

financial liability with a new financial liability with substantially different terms

is accounted for as an extinguishment of the original financial liability and the

recognition of a new financial liability.

When Xiyi Company derecognizes a financial liability or a part of it, it recognizes

the difference between the carrying amount of the financial liability (or part of the

financial liability) derecognized and the consideration paid (including any non-cash

assets transferred or new financial liabilities assumed) in profit or loss.

5.6 Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets

of Xiyi Company after deducting all of its liabilities. The consideration received

from issuing equity instruments, net of transaction costs, are added to shareholders

equity. Issuance (including refinancing), repurchase, sale or cancellation of equity

instruments as a process of changes in equity. Xiyi Company does not recognize

any changes in the fair value of equity instruments. Transaction costs related to the

transaction with equity are deducted from equity. All types of distributions made by

Xiyi Company to holders of equity instruments are as the profit allocation process.

— 261 —


5.7 Offsetting financial assets and financial liabilities

Where Xiyi Company has a legal right that is currently enforceable to set off the

recognized financial assets and financial liabilities, and intends either to settle

on a net basis, or to realize the financial asset and settle the financial liability

simultaneously, a financial asset and a financial liability shall be offset and the net

amount is presented in the statement of financial position. Except for the above

circumstances, financial assets and financial liabilities shall be presented separately

in the statement of financial position and shall not be offset.


6.1 Receivables that are individually significant and for which bad debt provision is


Basis or monetary

criteria for

determining an

individually

significant receivable

An accounts receivable that exceeds RMB2,500,000.00

or other receivable and a prepayment that exceeds

RMB750,000.00 is deemed as an individually

significant receivable by Xiyi Company.

Method of determining

provision for

receivables that are

individually significant

and for which bad

debt provision is


For receivables that are individually significant, Xiyi

Company assesses the receivables individually for

impairment. For a financial asset that is not impaired

individually, Xiyi Company includes the asset in

a group of financial assets with similar credit risk

characteristics and collectively assesses them for

impairment. Receivables for which an impairment

loss is individually recognized are not included in a


— 262 —


6.2 Accounts receivable that are not individually significant but for which bad debt

provision is individually assessed

Reasons for making

individual bad debt

provision

Those accounts receivables with not significant amount

and small credit risk such as related party transactions,

petty cash and other single but not significant amount

accrues provision according to the existing objective

evidence of impairment.

Bad debt provision

methods

Bad debt provision is individually assessed.

6.3 Receivables for which bad debt provision is collectively assessed on a portfolio

basis

Accounts receivable that

are not individually

significant but for

which are not devalued

when provision is

individually assessed:

Xiyi Company divides the receivables except above 6.1

and 6.2 into several age groups according to the nature

of the receivables. Based on the actual loss rate of

the receivables with the similarity and relevance of

credit risk characteristics and the degree of risk of the

receivables for the prior years, as well as the current

period’s actual situation, Xiyi Company determine the

bad debt provision ratio for various age groups of

receivables, and calculate the bad debt provision for

each age group of receivables according to

the above ratio.

Portfolios that aging analysis is used for bad debt provision:

Aging

Provision as

a proportion

of accounts

receivable

Provision as a

proportion of

other receivables

(%) (%)

within 1 year (include 1 year) 5% 5%



Over 3 years 100% 100%

— 263 —


7. Inventories

The inventories mainly include spare parts for repairs and maintenance of toll roads

infrastructure, office supplies, consumables, stocks and raw materials for daily operations

and sales of service areas etc. Inventories are initially measured at cost. Cost of

inventories comprises all costs of purchase and other expenditures incurred in bringing

the inventories to their present location and condition.

The cost of inventories is calculated using the first-in-first-out method when delivered.

Consumables are amortized using the write-off method.

At the end of each reporting period, inventories are measured at the lower of cost and net

realizable value. If the net realizable value is below the cost of inventories, a provision

for decline in value of inventories is made.

Net realizable value is the estimated selling price in the ordinary course of business less

the estimated costs of completion, the estimated costs necessary to make the sale and

relevant taxes. Net realizable value is determined on the basis of clear evidence obtained,

and takes into consideration the purposes of holding inventories and effect of post

statement of financial position events.

Provision for decline in value of other inventories is made based on the excess of cost of

inventory over its net realizable value on an item-by-item basis

After the provision for decline in value of inventories is made, if the circumstances that

previously caused inventories to be written down below cost no longer exist so that the

net realizable value of inventories is higher than their cost, the original provision for

decline in value is reversed and the reversal is included in profit or loss for the period.

The perpetual inventory system is maintained for inventory system.

— 264 —


8. Fixed assets

Fixed assets are tangible assets that are held for use in the production or supply of

services, for rental to others, or for administrative purposes, and have useful lives of

more than one accounting year. A fixed asset is recognized only when it is probable that

economic benefits associated with the asset will flow to Xiyi Company and the cost of the

asset can be measured reliably. Fixed assets are initially measured at cost and the effect

of any expected costs of abandoning the asset at the end of its use is considered.

Subsequent expenditures incurred for the fixed asset are included in the cost of the fixed

asset and if it is probable that economic benefits associated with the asset will flow to

Xiyi Company and the subsequent expenditures can be measured reliably. Meanwhile the

carrying amount of the replaced part is derecognized. Other subsequent expenditures are

recognized in profit or loss in the period in which they are incurred.

A fixed asset is depreciated over its useful life using the straight-line method since

the month subsequent to the one in which it is ready for intended use. The useful life,

estimated net residual value rate and annual depreciation rate of each category of fixed

assets are as follows:

Category

Depreciation

period

Residual

value rate

Annual

depreciation rate

(years) (%) (%)

Toll road structures 10-30 0 3.33-10


Communication and


Toll and ancillary equipment 8 3 12.1





Estimated net residual value of a fixed asset is the estimated amount that Xiyi Company

would currently obtain from disposal of the asset, after deducting the estimated costs of

disposal, if the asset were already of the age and in the condition expected at the end of

its useful life.

— 265 —


If a fixed asset is upon disposal or no future economic benefits are expected to be

generated from its use or disposal, the fixed asset is derecognized. When a fixed asset is

sold, transferred, retired or damaged, the amount of any proceeds on disposal of the asset

net of the carrying amount and related taxes is recognized in profit or loss for the period.

Xiyi Company reviews the useful life and estimated net residual value of a fixed asset

and the depreciation method applied at least once at each financial year-end, and account

for any change as a change in an accounting estimate.


Construction in progress is measured at its actual costs. The actual costs include various

construction expenditures during the construction period, borrowing costs capitalized

before it is ready for intended use and other relevant costs. Construction in progress is not

depreciated. Construction in progress is transferred to a fixed asset when it is ready for

intended use.


Intangible assets include toll road operation rights etc.

An intangible asset is measured initially at cost. When an intangible asset with a

finite useful life is available for use, its original cost less net residual value and any

accumulated impairment losses is amortized over its estimated useful life using the

straight-line method.

For an intangible asset with a finite useful life, Xiyi Company reviews the useful life and

amortization method at the end of the period, and makes adjustments when necessary.

If Xiyi Company has the right to charge a fee (as a price to provide construction services

in the service concession) for road users, Xiyi Company measures the intangible assets

initially at fair value of received or receivable consideration. The amount of toll road

operation rights is presented according to the historical cost after deducting amortization

and impairment losses. The intangible asset is amortized using traffic volume method


of the toll roads during operation period. When there is significant difference between

actual and estimated traffic volume, Xiyi Company will re-evaluate the total traffic

volume and calculate the amortization amount.

— 266 —


11. Employee benefits

Xiyi Company should recognize the actually occurred amount of short-term employee

benefits in the accounting period in which an employee provides service as a liability

with a corresponding charge to the profit or loss for the current period or in the cost of

relevant asset. Xiyi Company should recognize the staff welfare according to the actually

occurred amount as an expense or in the cost of relevant asset when it actually occurred.

Employee benefits which are non-monetary are measured at fair value.

Payments made by Xiyi Company of social security contributions for employees, such

as premiums or contributions on medical insurance, work injury insurance and maternity

insurance, payment of housing funds, and union running costs and employees education

costs provided in accordance with relevant requirements, in the accounting period in

which an employee provides services, are calculated according to prescribed bases and

percentages of provisions in determining the amount of employee benefits and recognize

relevant liabilities with a corresponding charge to the profit of loss for the current period

or the cost of a relevant asset.

Xiyi Company should recognize, in the accounting period in which an employee provides

service, the contribution payable to a defined contribution plan as a liability, with a

corresponding charge to the profit or loss for the current period or the cost of a relevant

asset.

When Xiyi Company provide termination benefit to their staff, a liability should be

recognized for termination benefits with a corresponding charge to the current year profit

or loss at the earlier of the following dates: when Xiyi Company cannot unilaterally

withdraw the offer of those benefits because of an employment termination plan or a

curtailment proposal; and when Xiyi Company recognizes costs or expenses related to a

restructuring that involves the payment of termination benefits.

For other long-term employee benefits, satisfied the conditions of defined contribution

plan, are accounted for in accordance with the relevant requirements of the above defined

contribution plan.

— 267 —


12. Revenue recognition

12.1 Toll revenue

Toll revenue is the income from operation of toll roads, which is recognized on a

receipt basis.

12.2 Revenue from rendering of services

Revenue from rendering of services of Xiyi Company include: ancillary services

and emergency assistance, advertising income etc. The revenue from rendering of

services is recognized when services are rendered; the amount of revenue can be

measured reliably, and it is probable that the associated economic benefits will

flow to Xiyi Company.

12.3 Revenue from sale of goods

Revenue from sale of goods is recognized when Xiyi Company has transferred

to the buyer the significant risks and rewards of ownership of the goods; Xiyi

Company 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 associated economic

benefits will flow to Xiyi Company; and the associated costs incurred or to be

incurred can be measured reliably.

12.4 Interest income

Interest income is accrued on a time basis, by reference to the effective interest rate

applicable.

— 268 —


13. Government grants

Government grants are transfer of monetary assets and non-monetary assets from the

government to Xiyi Company at no consideration. A government grant is recognized

only when Xiyi Company can comply with the conditions attaching to the grant and Xiyi

Company will receive the grant.

If a government grant is in the form of a transfer of a monetary asset, it is measured at

the amount received or receivable. Government grants are classified as grants related

to assets and grants related to income, according to the grant objects which have been

clearly defined in the government documents.

A government grant related to an asset is recognized as deferred income, and evenly

amortized to profit or loss over the useful life of the relevant asset. For a government

grant related to income, if the grant is a compensation for related expenses or losses

to be incurred in subsequent periods, the grant is recognized as deferred income, and

recognized in profit or loss over the periods in which the related costs are recognized. If

the grant is a compensation for related expenses or losses already incurred, the grant is

recognized immediately in profit or loss for the period.

14. Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of

qualifying asset are capitalized when expenditures for such asset and borrowing costs

are incurred and activities relating to the acquisition, construction or production of the

asset that are necessary to prepare the asset for its intended use or sale have commenced.

Capitalization of borrowing costs ceases when the qualifying asset being acquired,

constructed or produced becomes ready for its intended use or sale. Capitalization of

borrowing costs is suspended during periods in which the acquisition, construction or

production of a qualifying asset is suspended abnormally and when the suspension is

for a continuous period of more than 3 months. Capitalization is suspended until the

acquisition, construction or production of the asset is resumed.

Other borrowing costs are recognized as an expense in the period in which they are

incurred.

— 269 —


Where funds are borrowed under a specific-purpose borrowing, the amount of interest to

be capitalized is the actual interest expense incurred on that borrowing for the period less

any bank interest earned from depositing the borrowed funds before being used on the

asset or any investment income on the temporary investment of those funds. Where funds

are borrowed under general-purpose borrowings, Xiyi Company determines the amount

of interest to be capitalized on such borrowings by applying a capitalization rate to the

weighted average of the excess of cumulative expenditures on the asset over the amounts

of specific-purpose borrowings. The capitalization rate is the weighted average of the

interest rates applicable to the general-purpose borrowings. During the capitalization

period, exchange differences related to a specific-purpose borrowing denominated in

foreign currency are all capitalized. Exchange differences in connection with general-

purpose borrowings are recognized in profit or loss in the period in which they are

incurred.

15. Income tax

The income tax expenses include current income tax and deferred income tax.

15.1 Current income tax

At the end of each reporting period, current income tax liabilities (or assets) for

the current and prior periods are measured at the amount expected to be paid (or

recovered) according to the requirements of tax laws.

15.2 Deferred tax assets and deferred tax liabilities

For temporary differences between the carrying amounts of certain assets or

liabilities and their tax base, or between the nil carrying amount of those items that

are not recognized as assets or liabilities and their tax base that can be determined

according to tax laws, deferred tax assets and liabilities are recognized using the

balance sheet liability method.

Deferred tax is generally recognized for all temporary differences. Deferred tax

assets for deductible temporary differences are recognized to the extent that it

is probable that taxable profits will be available against which the deductible

temporary differences can be utilized. However, for temporary differences

associated with the initial recognition of goodwill and the initial recognition of an

asset or liability arising from a transaction (not a business combination) that affects

neither the accounting profit nor taxable profits (or deductible losses) at the time of

transaction, no deferred tax asset or liability is recognized.

— 270 —


For deductible losses and tax credits that can be carried forward, deferred tax assets

are recognized to the extent that it is probable that future taxable profits will be

available against which the deductible losses and tax credits can be utilized.

At the end of each reporting period, deferred tax assets and liabilities are measured

at the tax rates, according to tax laws, that are expected to apply in the period in

which the asset is realized or the liability is settled.

Current and deferred tax expenses or income are recognized in profit or loss for

the period, except when they arise from transactions or events that are directly

recognized in other comprehensive income or in shareholders’ equity, in which case

they are recognized in other comprehensive income or in shareholders’ equity; and

when they arise from business combinations, in which case they adjust the carrying

amount of goodwill.

At the end of each reporting period, the carrying amount of deferred tax assets is

reviewed and reduced if it is no longer probable that sufficient taxable profits will

be available in the future to allow the benefit of deferred tax assets to be utilized.

Such reduction in amount is reversed when it becomes probable that sufficient

taxable profits will be available.

15.3 Offset of income tax

When Xiyi Company has a legal right to settle on a net basis and intends either to

settle on a net basis or to realize the assets and settle the liabilities simultaneously,

current tax assets and current tax liabilities are offset and presented on a net basis.

When Xiyi Company has a legal right to settle current tax assets and liabilities on a

net basis, and deferred tax assets and deferred tax liabilities relate to income taxes

levied by the same taxation authority on either the same taxable entity or different

taxable entities which intend either to settle current tax assets and liabilities on a

net basis or to realize the assets and liabilities simultaneously, in each future period

in which significant amounts of deferred tax assets or liabilities are expected to be

reversed, deferred tax assets and deferred tax liabilities are offset and presented on

a net basis.

— 271 —


16. Operating leases

Leases are classified as finance leases whenever the terms of the lease transfer

substantially all the risks and rewards of ownership to the lessee. All other leases are

classified as operating leases.

Xiyi Company as lessee under operating leases

Operating lease payments are recognized on a straight-line basis over the term of the

relevant lease, and are either included in the cost of related asset or charged to profit or

loss for the period. Initial direct costs incurred are charged to profit or loss for the period.

Contingent rents are charged to profit or loss in the period in which they are actually

incurred.

Xiyi Company as lessor under operating leases

Rental income from operating leases is recognized in profit or loss on a straight-line basis

over the term of the relevant lease. Initial direct costs with more than an insignificant

amount are capitalized when incurred, and are recognized in profit or loss on the same

basis as rental income over the lease term. Other initial direct costs with an insignificant

amount are charged to profit or loss in the period in which they are incurred. Contingent

rents are charged to profit or loss in the period in which they actually arise.

— 272 —


(V) IMPORTANT JUDGMENT WHEN USING ACCOUNTING POLICY AND KEY

ASSUMPTIONS AND UNCERTAINTY ADOPTED IN ACCOUNTING ESTIMATES

In the application of the Xiyi Company’s accounting policies, which are described in Note IV,

Xiyi Company is required to make judgements, estimates and assumptions about the carrying

amounts of items in the financial statements that cannot be measured accurately, due to the

internal uncertainty of the operating activities. These judgements, estimates and assumptions are

based on historical experiences of Xiyi Company’s management as well as other factors that are

considered to be relevant. Actual results may differ from these estimates.

The aforementioned judgements, estimates and assumptions are reviewed regularly on a going

concern basis. The effect of a change in accounting estimate is recognized in the period of the

change if the change affects that period only; or recognized in the period of the change and

future periods, if the change affects that period and future periods.

— Key assumptions and uncertainty adopted in accounting estimates

Amortization of toll road operation rights

Amortisation of the toll road operation rights are calculated to write off their cost,

commencing from the date of commencement of commercial operation of the toll roads,


of the toll roads.

The management exercises their judgment in estimating the total expected traffic volume

of the toll roads during the operating period. When there is large difference between

actual and expected traffic volume, the management will exercises their judgment in the

accuracy of the expected traffic volume and adjust the future amortization per traffic

volume. Jiangsu Government Office issued SuZhengBan (2012) No. 128 “Notice of toll

road operation periods re-confirmation” in July 2012. The toll period of Wuxi Huantaihu

Expressway was changed to “October 2006–October 2031”, and the toll road operation

period changed from 30 years to 25 years correspondingly; Jiangsu Government Office

issued SuZhengBan (2013) No. 81 “Notice of toll road operation periods re-confirmation”

in September 2013. The toll period of Xiyi Expressway and Luma Highway were changed

to “September 2003–September 2028”, and the toll road operation period changed from

30 years to 25 years correspondingly. The management makes a reassessment of predicted

traffic volumes during the residual toll collection periods and adjusts the provisions of

amortization amounts for the standard traffic volumes on each road in accordance with

the assessment results. The adjustments please refer to Note (VI) 1.1.

— 273 —


Impairment of toll road operation rights

Determining whether toll road operation rights are impaired requires an estimation of the

recoverable amount.

In measuring the recoverable amount of the toll road operation rights, Xiyi Company

has calculated the value in use based on the following key assumptions: the current

and expected future traffic volume, current and expected future toll fee level, length of

operating rights, maintenance costs and required rate of return (the “Relevant Factors”).

In arriving at the recoverable amount of the toll road operation rights, the management

exercised their judgment with reference to these Relevant Factors in estimating the

recoverable amounts of the toll road operation rights. As a result, the management

considered that the recoverable amounts are above their carrying amounts and no

impairment was made accordingly. The management will pay close attention to the

relevant situation. If any indication shows that adjustments of relevant accounting

estimate assumptions need to be made, the management will adjust the carrying amounts

of toll road operation rights in the period of change in accounting estimate.

Deferred income tax assets

As at 30 September 2014, deferred tax for the deductible tax losses of RMB63,128,162.14

(31 December 2013: RMB88,680,870.51, 31 December 2012: RMB114,859,306.99, 31

December 2011: RMB95,055,153.88) are not recognized, because Xiyi Company could

not determine whether it can obtain adequate taxable income to offset the deductible tax

losses in the future. In case it is probable that taxable profits will be available against

the deductible losses and temporary difference, the carrying amounts of deferred tax

assets will be adjusted and the adjustment will be recognized to profit or loss in the

corresponding period.

— 274 —


(VI) CHANGES IN SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING

ESTIMATES

1. Changes in accounting estimates

1.1 Changes in toll road operation period

The contents and reasons of

change in accounting estimate

Affected

financial

statements

items

Affected

amount-Year

2012

Affected

amount-Year

2013

Affected

amount-From

1 January

2014 to 30

September

2014

Jiangsu Government Office issued SuZhengBan

(2012) No. 128 “Notice of toll road operation

periods re-confirmation” in July 2012. The toll

period of Wuxi Huantaihu Expressway was

changed to “October 2006–October 2031”, and the

toll road operation period changed from 30 years

to 25 years correspondingly; Jiangsu Government

Office issued SuZhengBan (2013) No. 81 “Notice

of toll road operation periods re-confirmation”

in September 2013. The toll period of Xiyi

Expressway and Luma Highway were changed

to “September 2003–September 2028”, and the

toll road operation period changed from 30 years

to 25 years correspondingly. Xiyi Compamy

applied prospectively, made a reassessment of

predicted traffic volumes according to the residual

toll collection periods and adjusts the provisions

of amortization amounts for the standard traffic

volumes of each road in accordance with the

assessment results since July 2012 for Wuxi

Huantaihu Expressway toll road operation right

and October 2013 for Xiyi Expressway and Luma

Highway’s toll road operation right.

Intangible

assets

Decrease

90,954.43

Decrease

3,322,216.47

Decrease

13,957,632.04

Operating

cost

Increase

90,954.43

Increase

3,322,216.47

Increase

13,957,632.04

— 275 —


1.2 Changes in depreciation year

According to the progress of Xiyi Company’s modernization and the judgments

on the future usage of relevant ancillary facilities of expressway, the original

categories of fixed assets of Xiyi Company cannot satisfy the requirements of

assets management, and the expected useful life and ratio of residual value of

certain categories of fixed assets also changed. Xiyi Company adopted prospective

application method to make adjustments to the categories, use life and residuals rate

of certain fixed assets since 1 January 2014. Impact of the changes in accounting

estimates upon the items in the financial statements for the periods as follows:

The category, depreciation period, residual rate and depreciation rate of Xiyi

Company’s fixed assets are as follows before the change in accounting estimates:

Category

Depreciation

period

Residual

value rate

Annual

depreciation rate

(years) (%) (%)

Toll road structures 30 3 3.23


Communication and


Toll and

ancillary equipment 8 3 12.1


Other machine

and equipment 8–10 3 9.7–12.1

— 276 —


The category, depreciation period, residual rate and depreciation rate of Xiyi

Company’s fixed assets are as follows after the change in accounting estimates:

Category

Depreciation

period

Residual

value rate

Annual

depreciation rate

(years) (%) (%)

Toll road structures 10–30 0 3.33–10


Communication and


Toll and

ancillary equipment 8 3 12.1





The impact of the changes in accounting estimate on the Financial Information:

The impact on the Financial Information

30 September 2014

and From 1

January 2014 to

30 September 2014

Decrease of fixed assets 2,074,542.52

Increase of operating costs 2,074,542.52

Xiyi Company’s management believes that the changes in accounting estimates

above will not have a significant impact on Xiyi Company’s financial position and

operating results.

— 277 —


(VII) TAXES

Major categories of taxes and tax rates

Category of tax Basis of tax computation Tax rate

Value Added

Tax (“VAT”)

Output VAT less deductible input VAT 17%

Business Tax Toll income 3%

Obstacle remove and maintenance income 5%

Rental income 5%

Food and beverage income 5%

City maintenance

and construction tax

Actual paid business tax and VAT 5%-7%

Educational surtax

and surcharge

Actual paid business tax and VAT 5%

Enterprise income tax Taxable income 25%

(VIII) NOTES TO THE FINANCIAL INFORMATION

1. Cash and bank balances

Unit: RMB

Item

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Cash 123,163.64 10,645.52 5,140.84 10,034.70

Bank balances 45,823,551.85 24,037,667.59 67,931,925.51 10,829,658.99

Total 45,946,715.49 24,048,313.11 67,937,066.35 10,839,693.69

— 278 —


Deposits in related parties:

Unit: RMB

Related party

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Jiangsu Communicat ions

Holdings Group Finance

Company Limited (Note) 36,312,206.85 9,520,931.71 19,316,097.92 —

Note: Jiangsu Communications Holdings Group Finance Company Limited (“Group Finance Company”) is a subsidiary of Communications Holdings, as well as a non-bank financial institution licenced by China Bank Regulatory Commission.


(1) Disclosure of accounts receivable by categories:

Unit: RMB


Category

Carrying

amount Proportion

Bad debt

provision Proportion

Carrying

amount Proportion

Bad debt


(%) (%) (%) (%)



Accounts receivable for which

bad debt provision has been

assessed by portfolios — — — — — — — —



but for which bad debt

provision has been assessed

individually 3,881,925.54 100 — — 3,525,984.99 100 — —

Total 3,881,925.54 100 — — 3,525,984.99 100 — —

— 279 —



Category

Carrying

amount Proportion

Bad debt


Carrying

amount Proportion

Bad debt


(%) (%) (%) (%)



Accounts receivable for which

bad debt provision has been

assessed by portfolios — — — — — — — —



but for which bad debt

provision has been assessed

individually 3,679,991.65 100 — — 3,137,270.00 100 — —

Total 3,679,991.65 100 — — 3,137,270.00 100 — —

Majority toll road and ancillary services income are settled by cash. The accounts

receivable mainly represent the receivables due from other toll operation companies

through toll network internal income reallocation.

Explanations of categories of accounts receivable:

An accounts receivable that exceeds RMB2,500,000 is deemed as an individually

significant receivable by Xiyi Company.

— 280 —


(2) Aging analysis of accounts receivable is as follows:

Unit: RMB


Aging

Carrying

amount Proportion

Bad debt


Carrying

amount Proportion

Bad debt


(%) (%)

Within 1 year 3,881,925.54 100 — 3,881,925.54 3,525,984.99 100 — 3,525,984.99

More than 1 year

but not exceed

2 years — — — — — — — —

More than 2 years

but not exceed

3 years — — — — — — — —

More than 3 years — — — — — — — —

Total 3,881,925.54 100 — 3,881,925.54 3,525,984.99 100 — 3,525,984.99

Unit: RMB


Aging

Carrying

amount Proportion

Bad debt


Carrying

amount Proportion

Bad debt


(%) (%)

Within 1 year 3,679,991.65 100 — 3,679,991.65 3,137,270.00 100 — 3,137,270.00

More than 1 year

but not exceed

2 years — — — — — — — —

More than 2 years

but not exceed

3 years — — — — — — — —

More than 3 years — — — — — — — —

Total 3,679,991.65 100 — 3,679,991.65 3,137,270.00 100 — 3,137,270.00

(3) There are no accounts receivable due from shareholders holding at least 5% of the

Xiyi Company’s shares with voting power in the reporting periods.

— 281 —


(4) Top five entities with the largest balances of accounts receivable:

30 September 2014

Unit: RMB

Name of entity

Relationship with

the Xiyi Company Amount Aging

Proportion of

the amount

to the total

accounts

receivable

(%)

Jiangsu Expressway Network

Operation and Management

Co., Ltd. (“Network

Operation Company”)

Same ultimate

shareholder

2,143,618.54 Within 1 year 55

Group Finance Company Same ultimate

shareholder

1,279,365.00 Within 1 year 33

Jiangsu Ninghang

Expressway Co., Ltd.


Same ultimate

shareholder

372,349.00 Within 1 year 10

Guangjing Xicheng Same ultimate

shareholder

57,590.00 Within 1 year 1

Suzhou Sujiahang


(“SuJiahang Expressway”)

Same ultimate

shareholder

28,943.00 Within 1 year 1

Total 3,881,865.54 100

— 282 —


31 December 2013

Unit: RMB

Name of entity

Relationship with

Xiyi Company Amount Aging

Proportion of

the amount

to the total

accounts

receivable

(%)


shareholder

1,137,345.00 Within 1 year 32


shareholder

792,826.99 Within 1 year 22

Jiangsu Expressway Same ultimate

shareholder

477,510.00 Within 1 year 14


shareholder

217,083.00 Within 1 year 6

Jiangsu Expressway

Petroleum Co., Ltd.

(Expressway Petroleum

Company)

Same ultimate

shareholder

215,500.00 Within 1 year 6

Total 2,840,264.99 80

— 283 —


31 December 2012

Unit: RMB

Name of entity

Relationship with

Xiyi Company Amount Aging

Proportion of

the amount

to the total

accounts

receivable

(%)


shareholder

986,777.00 Within 1 year 27

Suzhou Circle

Expressway Co., Ltd

(“Suzhou Circle”)

Same ultimate

shareholder

509,103.00 Within 1 year 14


shareholder

362,422.00 Within 1 year 10


shareholder

313,995.00 Within 1 year 9


Company

Same ultimate

shareholder

273,700.00 Within 1 year 7

Total 2,445,997.00 67

— 284 —


31 December 2011

Unit: RMB

Name of entityRelationship with Xiyi Company Amount Aging

Proportion of the amount to the total

accounts receivable

(%)


shareholder

1,846,366.00 Within 1 year 59


Company

Same ultimate

shareholder

392,600.00 Within 1 year 12


shareholder

240,023.00 Within 1 year 8


shareholder

149,740.00 Within 1 year 5

Suzhou Circle Same ultimate

shareholder

145,076.00 Within 1 year 4

Total 2,773,805.00 88

(5) Receivables due from related parties

Unit: RMB


Name of entity

Relationship with Xiyi Company Amount


accounts receivable Amount


accounts receivable

(%) (%)

Expressway

Petroleum

Company

Same ultimate

shareholder

— — 215,500.00 6

Total — — 215,500.00 6

— 285 —



Name

of entity

Relationship

with Xiyi

Company Amount

Proportion of

the amount

to the total

accounts

receivable Amount

Proportion of

the amount

to the total

accounts

receivable

(%) (%)

Expressway

Petroleum

Company

Same ultimate

shareholder

273,700.00 7 392,600.00 12

Total 273,700.00 7 392,600.00 12

Note: At 30 September 2014, 31 December 2013, 31 December 2012 and 31 December 2011, besides the accounts receivable of gas station lease from Expressway Petroleum Company stated above, there are split toll road fee receivables from, Network Operation Company, Suzhou Circular, Ninghang Expressway and other toll operation companies within Jiangsu toll road network (“Toll Road Network Companies”) which amounted to RMB3,881,925.54, RMB3,226,775.99, RMB2,818,291.65 and RMB2,711,034.00 respectively. The ultimate shareholder of these Toll Road Network Companies is Communications Holdings, except for which Xiyi Company has no other control, joint control or significant influence relationship with them.

3. Prepayments

Disclosure of prepayments by aging:

Unit: RMB


Aging Amount Proportion Amount Proportion Amount Proportion Amount Proportion

(%) (%) (%) (%)

Within 1 year 342,486.74 100 192,341.30 100 216,521.74 100 281,398.98 100

Total 342,486.74 100 192,341.30 100 216,521.74 100 281,398.98 100

— 286 —


4. Other receivables

(1) Disclosure of other receivable by categories:

Unit: RMB


CategoryCarrying

amount Proportion Bad debt provision Proportion

Carrying amount Proportion

Bad debt provision Proportion

(%) (%) (%) (%)

Other receivables that are individually significant — — — — 946,263.15 75 — —

Other receivables for which bad debt provision has been assessed by portfolios 533,166.54 100 600.00 100 309,656.00 25 600.00 100

Other receivables that are not individually significant but for which bad debt provision has been assessed individually — — — — — — — —

Total 533,166.54 100 600.00 100 1,255,919.15 100 600.00 100

— 287 —



CategoryCarrying

amount Proportion Bad debt provision Proportion


Bad debt provision Proportion

(%) (%) (%) (%)

Other receivable that are individually significant 946,425.55 77 — — 99,612,855.30 99 — —

Other receivable for which bad debt provision has been assessed by portfolios 275,900.00 23 600.00 100 375,245.16 1 600.00 100

Other receivables that are not individually significant but for which bad debt provision has been assessed individually — — — — — — — —

Total 1,222,325.55 100 600.00 100 99,988,100.46 100 600.00 100

Explanations of categories of other receivables:

Other receivables that exceed RMB750,000 are deemed as an individually significant

receivable by Xiyi Company.

Mainly Other Receivables of Xiyi Company include compensation from damaged road

and petty cash etc. The balance at 31 December 2011 includes RMB87,378,664.51

deposited in the financial settlement center of Communications Holdings.

— 288 —


(2) Aging analysis of other receivables is as follows:

Unit: RMB


AgingCarrying

amount Proportion Bad debt provision Book value



(%) (%)

Within 1 year 516,566.54 97 — 516,566.54 1,241,319.15 99 — 1,241,319.15More than 1 year but not

exceed 2 years 4,000.00 1 — 4,000.00 14,000.00 1 — 14,000.00More than 2 years but

not exceed 3 years 12,000.00 2 — 12,000.00 — — — —More than 3 years 600.00 — 600.00 — 600.00 — 600.00 —

Total 533,166.54 100 600.00 532,566.54 1,255,919.15 100 600.00 1,255,319.15


AgingCarrying

amount Proportion Bad debt provision Book value



(%) (%)

Within 1 year 1,209,725.55 99 — 1,209,725.55 89,007,413.97 89 — 89,007,413.97More than 1 year but not

exceed 2 years 12,000.00 1 — 12,000.00 10,980,086.49 11 — 10,980,086.49More than 2 years but

not exceed 3 years — — — — — — — —More than 3 years 600.00 — 600.00 — 600.00 — 600.00 —

Total 1,222,325.55 100 600.00 1,221,725.55 99,988,100.46 100 600.00 99,987,500.46

— 289 —


(3) Other receivables portfolios for which bad debt provision has been assessed using

aging analysis approach:


Portfolio title

Carrying

amount

Bad debt

provision

Carrying

amount

Bad debt

provision

Carrying

amount

Bad debt

provision

Carrying

amount

Bad debt

provision

Within 1 year 516,566.54 — 295,056.00 — 263,300.00 — 374,645.16 —

1-2 year 4,000.00 — 14,000.00 — 12,000.00 — — —

2-3year 12,000.00 — — — — — — —

Over 3 years 600.00 600.00 600.00 600.00 600.00 600.00 600.00 600.00

Total 533,166.54 600.00 309,656.00 600.00 275,900.00 600.00 375,245.16 600.00

5. Inventories

Unit: RMB


Item

Carrying

amount Devaluation Book value

Carrying


Raw materials 62,874.97 — 62,874.97 68,183.09 — 68,183.09

Merchandise 156,395.83 — 156,395.83 193,905.39 — 193,905.39

Total 219,270.80 — 219,270.80 262,088.48 — 262,088.48


Item

Carrying


Carrying


Raw materials 80,874.87 — 80,874.87 86,667.97 — 86,667.97

Merchandise 174,344.55 — 174,344.55 110,102.62 — 110,102.62

Total 255,219.42 — 255,219.42 196,770.59 — 196,770.59

— 290 —


6. Available-for-sale financial assets

Details of available-for-sale financial assets as follows:

Unit: RMB

Item

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Available-for-sale

equity instruments 11,230,000.00 11,230,000.00 8,150,000.00 8,150,000.00

30 September 2014 and 31 December 2013

Unit: RMB

Classification

Available-for-sale

equity instruments



Accumulated fair value change that have been charged

in the other comprehensive income —


— 291 —



Unit: RMB

Classification

Available-for-sale

equity instruments



Accumulated fair value change that have been charged

in the other comprehensive income —


At 30 September 2014 and 31 December 2013, the available-for-sale financial instrument

of Xiyi Company include: the investment amounting RMB5,230,000.00 on Network



Jiangsu Sundian Engineering Co., Ltd. (“Sundian”) at the investment ratio of 7.5%.

At 31 December 2012 and 31 December 2011, the available-for-sale financial instrument

of Xiyi Company include: the investment amounting RMB2,150,000.00 on Network



Sundian at the investment ratio of 7.5%.

For the above available-for-sale financial assets, since they don’t have a quoted market

price in an active market and the fair value could not be reliably measured, nor did they

have any significant influence over the investee companies, Xiyi Company measures them

at cost less impairment.

— 292 —


7. Fixed assests

(1) Fixed assets

Unit: RMB

Item 1 January 2011Increase in the

current yearDecrease in the

current year31 December

2011Increase in the



2012Increase in the



2013Increase in the current period

Decrease in the current period

Category adjustment

30 September 2014

I. Total original carrying amount 205,792,150.55 26,010,236.77 -152,033.40 231,650,353.92 63,789,549.96 -835,368.90 294,604,534.98 20,184,769.29 -1,034,924.00 313,754,380.27 1,210,515.00 -1,547,760.60 — 313,417,134.67 Including: Toll road structures 53,772,226.08 13,121,364.62 — 66,893,590.70 20,429,162.00 — 87,322,752.70 64,110.00 — 87,386,862.70 — — 2,560,344.50 89,947,207.20 Safety equipment 90,474,607.91 367,224.45 — 90,841,832.36 24,495,570.77 — 115,337,403.13 — — 115,337,403.13 — — — 115,337,403.13 Communication and surveillance equipment 13,427,467.63 — — 13,427,467.63 8,305,015.00 — 21,732,482.63 15,439,812.40 — 37,172,295.03 — — 1,610,606.00 38,782,901.03 Toll and ancillary equipment 12,609,972.20 5,202,098.00 — 17,812,070.20 5,421,079.00 — 23,233,149.20 3,422,664.00 — 26,655,813.20 1,060,000.00 -1,397,760.60 -1,577,124.00 24,740,928.60 Motor vehicles 7,772,965.47 868,735.00 — 8,641,700.47 1,110,018.90 -835,368.90 8,916,350.47 — — 8,916,350.47 — — — 8,916,350.47 Machinery and equipment 27,734,911.26 6,450,814.70 -152,033.40 34,033,692.56 4,028,704.29 — 38,062,396.85 1,258,182.89 -1,034,924.00 38,285,655.74 — -150,000.00 -8,394,318.32 29,741,337.42 Electronic equipment — — — — — — — — — — 118,505.00 — 5,029,362.13 5,147,867.13 Furniture and others — — — — — — — — — — 32,010.00 — 771,129.69 803,139.69

II. Total accumulated depreciation 128,595,695.92 22,428,594.00 -131,026.70 150,893,263.22 22,445,861.70 -639,249.40 172,699,875.52 24,832,133.75 -928,584.93 196,603,424.34 13,276,761.74 -1,501,327.79 — 208,378,858.29 Including: Toll road structures 13,770,866.57 2,742,129.41 — 16,512,995.98 3,308,767.81 — 19,821,763.79 4,959,898.15 — 24,781,661.94 3,256,584.65 — 2,521,571.13 30,559,817.72 Safety equipment 65,932,558.85 11,073,370.60 — 77,005,929.45 11,076,339.00 — 88,082,268.45 10,324,828.46 — 98,407,096.91 3,747,500.83 — — 102,154,597.74 Communication and surveillance equipment 11,013,424.74 1,441,981.87 — 12,455,406.61 891,276.68 — 13,346,683.29 3,497,603.89 — 16,844,287.18 3,104,049.01 — 1,146,258.16 21,094,594.35 Toll and ancillary equipment 11,661,977.09 1,709,507.31 — 13,371,484.40 905,064.18 — 14,276,548.58 3,634,588.47 — 17,911,137.05 1,763,183.43 -1,355,827.79 -1,112,758.16 17,205,734.53 Motor vehicles 5,505,288.10 1,032,973.52 — 6,538,261.62 1,288,386.88 -620,988.90 7,205,659.60 462,377.55 — 7,668,037.15 287,456.99 — — 7,955,494.14 Machinery and equipment 20,711,580.57 4,428,631.29 -131,026.70 25,009,185.16 4,976,027.15 -18,260.50 29,966,951.81 1,952,837.23 -928,584.93 30,991,204.11 836,451.23 -145,500.00 -7,222,850.71 24,459,304.63 Electronic equipment — — — — — — — — — — 202,173.24 — 4,187,754.59 4,389,927.83 Furniture and others — — — — — — — — — — 79,362.36 — 480,024.99 559,387.35

III. Total net book value of fixed assets 77,196,454.63 80,757,090.70 121,904,659.46 117,150,955.93 105,038,276.38 Including: Toll road structures 40,001,359.51 50,380,594.72 67,500,988.91 62,605,200.76 59,387,389.48 Safety equipment 24,542,049.06 13,835,902.91 27,255,134.68 16,930,306.22 13,182,805.39 Communication and surveillance equipment 2,414,042.89 972,061.02 8,385,799.34 20,328,007.85 17,688,306.68 Toll and ancillary equipment 947,995.11 4,440,585.80 8,956,600.62 8,744,676.15 7,535,194.07 Motor vehicles 2,267,677.37 2,103,438.85 1,710,690.87 1,248,313.32 960,856.33 Machinery and equipment 7,023,330.69 9,024,507.40 8,095,445.04 7,294,451.63 5,282,032.79 Electronic equipment — — — — 757,939.30 Furniture and others — — — — 243,752.34

— 293 —


Unit: RMB

Item 1 January 2011Increase in the



2011Increase in the



2012Increase in the



2013Increase in the current period

Decrease in the current period

Category adjustment

30 September 2014

IV. Total provision for impairment losses — — — — — — — — — — — — — — Including: Toll road structures — — — — — — — — — — — — — — Safety equipment — — — — — — — — — — — — — — Communication and surveillance equipment — — — — — — — — — — — — — — Toll and ancillary equipment — — — — — — — — — — — — — — Motor vehicles — — — — — — — — — — — — — — Machinery and equipment — — — — — — — — — — — — — — Electronic equipment — — — — — — — — — — — — — — Furniture and others — — — — — — — — — — — — — —

V. Total carrying amount of fixed assets 77,196,454.63 80,757,090.70 121,904,659.46 117,150,955.93 105,038,276.38 Including: Toll road structures 40,001,359.51 50,380,594.72 67,500,988.91 62,605,200.76 59,387,389.48 Safety equipment 24,542,049.06 13,835,902.91 27,255,134.68 16,930,306.22 13,182,805.39 Communication and surveillance equipment 2,414,042.89 972,061.02 8,385,799.34 20,328,007.85 17,688,306.68 Toll and ancillary equipment 947,995.11 4,440,585.80 8,956,600.62 8,744,676.15 7,535,194.07 Motor vehicles 2,267,677.37 2,103,438.85 1,710,690.87 1,248,313.32 960,856.33 Machinery and equipment 7,023,330.69 9,024,507.40 8,095,445.04 7,294,451.63 5,282,032.79 Electronic equipment — — — — 757,939.30 Furniture and others — — — — 243,752.34

(2) Explanation of movements of fixed assets:

During the period from 1 January 2014 to 30 September 2014, the increase

in the original carrying amount for the period consists of acquisitions of

RMB1,210,515.00, while the decrease in the original carrying amount for the

period consists of a decrease of RMB1,547,760.60. Accumulated depreciation

for the period consists of charge for the period of RMB13,276,761.74, while the

decrease in accumulated depreciation for the period consists of RMB1,501,327.79

on disposals.

During the year 2013, the increase in the original carrying amount for the year

consists of acquisitions of RMB4,100,852.89, an increase of RMB16,083,916.40

transferred from construction in progress, while the decrease in the original




for the year consists of RMB928,584.93 on disposals.

— 294 —


During year 2012, the increase in the original carrying amount for the year consists

of acquisitions of RMB62,395,829.96, an increase of RMB1,393,720.00 transferred

from construction in progress, while the decrease in the original carrying amount

for the year consists of a decrease of RMB835,368.90 disposals. The increase

in accumulated depreciation for the year consists of charge for the year of

RMB22,445,861.70, while the decrease in accumulated depreciation for the year

consists of RMB639,249.40 on disposals.

During year 2011, the increase in the original carrying amount for the year consists

of acquisitions of RMB7,869,622.51, an increase of RMB18,140,614.26 transferred

from construction in progress, while the decrease in the original carrying amount

for the year consists of a decrease of RMB152,033.40 disposals. The increase

in accumulated depreciation for the year consists of charge for the year of

RMB22,428,594.00, while the decrease in accumulated depreciation for the year

consists of RMB131,026.70 on disposals.

(3) At 30 September 2014, 31 December 2013, 31 December 2012 and 31

December 2011, the gas station property of carrying amount of RMB522,849.79,

RMB551,499.63, RMB579,752.85, RMB605,131.13 is used for Expressway

Petroleum Company’s operating lease.

— 295 —



(1) Details of construction in progress are as follows:

Unit: RMB


Item

Carrying

amount

Provision

for

impairment

losses Book value

Carrying

amount

Provision

for

impairment

losses Book value

Carrying

amount

Provision

for

impairment

losses Book value

Carrying

amount

Provision

for

impairment

losses Book value

ETC project funds — — — — — — — — — 644,000.00 — 644,000.00

Station area, service

area expansion project — — — — — — — — — 576,220.00 — 576,220.00

Monitoring system

transformation — — — — — — 6,152,105.00 — 6,152,105.00 — — —

Card issuing

machine facilities 510,000.00 — 510,000.00 — — — — — — — — —

Total 510,000.00 — 510,000.00 — — — 6,152,105.00 — 6,152,105.00 1,220,220.00 — 1,220,220.00

Xiyi Company did not note any indicators of impairment; therefore there is no

provision for impairment of construction in progress.

(2) Changes in significant construction in progress

Item

1 January

2011

Increase in the

current year

Transfer to

fixed assets

Accumulated

Capitalized

Interest

31 December

2011

Increase in the

current year

Transfer to

fixed assets

Accumulated

Capitalized

Interest

31 December

2012

Increase in the

current year

Transfer to

fixed assets

Accumulated

Capitalized

Interest

31 December

2013

Increase in the

current period

Transfer to

fixed assets

Accumulated

Capitalized

Interest

30 September

2014

Building reconstruction project 1,078,915.90 10,373,365.62 -11,452,281.52 — — — — — — — — — — — — — —

ETC project funds 5,830,080.00 -5,186,080.00 — 644,000.00 161,000.00 -805,000.00 — — 298,200.00 -298,200.00 — — — — — —

Station area, service area

expansion project 3,800.00 2,074,672.74 -1,502,252.74 — 576,220.00 12,500.00 -588,720.00 — — — — — — — — — —

Monitoring system

transformation — — — — — 6,152,105.00 — — 6,152,105.00 8,989,507.40 -15,141,612.40 — — — — — —

Service area gas station

renovation — — — — — — — — — 644,104.00 -644,104.00 — — — — — —

Card issuing machine facilities — — — — — — — — — — — — — 510,000.00 — — 510,000.00

Total 1,082,715.90 18,278,118.36 -18,140,614.26 — 1,220,220.00 6,325,605.00 -1,393,720.00 — 6,152,105.00 9,931,811.40 -16,083,916.40 — — 510,000.00 — — 510,000.00

— 296 —



Unit: RMB

Item 1 January 2011

Increase in the

year

31 December

2011

Increase in the

year

Decrease in the

year

31 December

2012

Increase in the

year

31 December

2013

Increase in the

period

30 September

2014

1. Total original

carrying amount 2,783,099,838.21 — 2,783,099,838.21 — -1,753,279.86 2,781,346,558.35 — 2,781,346,558.35 — 2,781,346,558.35

Toll road

operation rights 2,783,099,838.21 — 2,783,099,838.21 — -1,753,279.86 2,781,346,558.35 — 2,781,346,558.35 — 2,781,346,558.35

2. Total accumulated

amortization 304,642,749.54 38,730,783.39 343,373,532.93 36,138,215.03 — 379,511,747.96 51,863,169.64 431,374,917.60 50,462,911.33 481,837,828.93

Toll road

operation rights 304,642,749.54 38,730,783.39 343,373,532.93 36,138,215.03 — 379,511,747.96 51,863,169.64 431,374,917.60 50,462,911.33 481,837,828.93

3. Total net book value

of intangible assets 2,478,457,088.67 2,439,726,305.28 2,401,834,810.39 2,349,971,640.75 2,299,508,729.42

Toll road

operation rights 2,478,457,088.67 2,439,726,305.28 2,401,834,810.39 2,349,971,640.75 2,299,508,729.42

4. Total provision

for impairment — — — — — — — — — —

Toll road

operation rights — — — — — — — — — —

5. Total carrying amount

of intangible assets 2,478,457,088.67 2,439,726,305.28 2,401,834,810.39 2,349,971,640.75 2,299,508,729.42

Toll road

operation rights 2,478,457,088.67 2,439,726,305.28 2,401,834,810.39 2,349,971,640.75 2,299,508,729.42

— 297 —


Description of intangible assets:

Note1:

At 31 December 2013, the toll road operation rights of Xiyi Expressway with the net book value RMB1,375,202,625.22 are pledged to secure bank loan amounting to 250,000,000.00. The amortization of such toll road operation rights during the period was RMB44,120,302.85.

At 31 December 2012, the toll road operation rights of Xiyi Expressway with the net book value RMB1,419,322,928.07 are pledged to secure bank loan amounting to 355,000,000.00. The amortization of such toll road operation rights during the current year was RMB32,211,015.46.

At 31 December 2011, the toll road operation rights of Xiyi Expressway with the net book value RMB1,451,533,943.53 are pledged to secure bank loan amounting to 535,000,000.00. The amortization of such toll road operation rights during the current year was RMB34,719,374.39.

Note2:

During the period from 1 January 2014 to 30 September 2014, the increase in accumulated amortization for the period consisted of charge for the period of RMB50,462,911.33.

During the year 2013, the increase in accumulated amortization for the year consisted of charge for the year of RMB51,863,169.64.

During the year 2012, the decrease in the original carrying amount consists of RMB1,753,279.86 which was an adjustment based on the final verification report of Wuxi Huantaihu Expressway. The increase in accumulated amortization for the year consisted of charge for the year of RMB36,138,215.03.

During the year 2011, the increase in accumulated amortization for the year consisted of charge for the year of RMB38,730,783.39.

— 298 —


10. Deferred tax assets

(1) Details of unrecognized deferred tax assets:

Unit: RMB

Item

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Deductible tax losses 63,128,162.14 88,680,870.51 114,859,306.99 95,055,153.88

(2) Deductible tax losses, for which no deferred tax assets are recognized, will expire

in the following years:

Unit: RMB

Expiration time

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Year 2013 — — 52,905,047.88 52,905,047.88

Year 2014 — 28,374,527.03 28,374,527.03 28,374,527.03

Year 2015 7,985,634.81 7,985,634.81 7,985,634.81 7,985,634.81

Year 2016 5,789,944.16 5,789,944.16 5,789,944.16 5,789,944.16

Year 2017 19,804,153.11 19,804,153.11 19,804,153.11 —

Year 2018 26,726,611.40 26,726,611.40 — —

Year 2019 2,821,818.66 — — —

(3) Deferred tax for the deductible tax losses are not recognized, because Xiyi

Company could not determine whether it can obtain adequate taxable income to

offset the deductible tax losses in the future.

— 299 —


11. Provision for impairment losses of assets

Period from 1 January 2014 to 30 September 2014

Unit: RMB


Item

1 January

2014

Increase in

the period Reversals Write-off

Other

Write-off

30 September

2014

Bad debt

provision 600.00 — — — — 600.00

Year 2013

Unit: RMB


Item

1 January

2013

Increase in

the year Reversals Write-off

Other

Write-off

31 December

2013

Bad debt

provision 600.00 — — — — 600.00

Year 2012

Unit: RMB


Item

1 January

2012

Increase in


Other

Write-off

31 December

2012

Bad debt

provision 600.00 — — — — 600.00

— 300 —


Year 2011

Unit: RMB


Item

1 January

2011

Increase in


Other

Write-off

31 December

2011

Bad debt

provision 600.00 — — — — 600.00

12. Short-term borrowings

(1) Categories of short-term borrowings:

Unit: RMB

Item

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Bank loans — — 50,000,000.00 690,000,000.00

Including: Unsecured loans — — 50,000,000.00 180,000,000.00

Entrusted loans

(Note 1) — — — 460,000,000.00

Guaranteed

loans (Note 2) — — — 50,000,000.00

Non-bank financial

institutions loans 415,000,000.00 465,000,000.00 555,000,000.00 —

Including: Unsecured loans

(Note 3) 180,000,000.00 100,000,000.00 150,000,000.00 —

Entrusted loans

(Note 4) 235,000,000.00 365,000,000.00 405,000,000.00 —

Loans from a related party 200,000,000.00 200,000,000.00 — —

Including: Short-term

bonds

(Note 5) 200,000,000.00 200,000,000.00 — —

Total 615,000,000.00 665,000,000.00 605,000,000.00 690,000,000.00

— 301 —


There are no short-term borrowings overdue but not yet repaid.

The interest of short loan stated above is: 30 September 2014: 5.60% – 6.00%; 31

December 2013: 5.30%–6.00%; 31 December 2012: 5.00%–7.22%; 31 December

2011: 5.00%–6.60%.

Note 1: Entrusted bank loans mainly include loans provided by Communications Holdings and its subsidiaries through banks.

Note 2: Guaranteed bank loans indicate loans that guaranteed by Communications Holdings.

Note 3: Unsecured non-bank financial institutions loans are provides by Group Finance Company.

Note 4: Unsecured non-bank financial institutions entrusted loans mainly include loans provided by Communications Holdings and its affiliated enterprises through Group Finance Company.

Note 5: Short-term bonds represent the bonds issued by Communications Holdings and allocated to Xiyi Company according to the fund use term of the bond prospectus. Xiyi Company paid the corresponding interest and principal to Communications Holdings. The detail of the short-term bond include: (1) Communications Holdings issued “13 Su Communications CP005” at 13 September 2013 and allocated RMB200,000,000 to Xiyi Company. Bond duration is six month. Annual interest rate is 5.30%; (2) Communications Holdings issued “14 Su Communications CP004” at 25 April 2014 and allocated RMB200,000,000 to Xiyi Company. Bond duration is twelve month. Annual interest rate is 5.60%.

13. Accounts payable

(1) Details of Accounts payable are as follows

Unit: RMB

Item

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Construction payable 5,183,011.20 7,021,852.12 36,921,686.05 7,695,039.56

Toll road fee payable 116,715.00 3,533,029.00 5,753,714.00 2,030,470.86

Patrol fee payable — — 1,260,000.00 —

Goods payable 332,332.12 84,785.00 122,660.85 137,941.95

Others — 286,822.00 112,828.00 176,046.00

Total 5,632,058.32 10,926,488.12 44,170,888.90 10,039,498.37

— 302 —


(2) There is no accounts payable to shareholders holding at least 5% of Xiyi

Company’s shares with voting power in the reporting period. Details of accounts

payable to related parties please refer to note IX 4(3).

Description of significant accounts payable aged more than one year:

30 September 2014

Unit: RMB




Jiangsu Changtian

Zhiyuan

Communication

Technology

1,432,975.40 Guarantee money of the project

At 31 December 2013, no significant accounts payable aged more than one year

exists.

31 December 2012

Unit: RMB




Wuxi highway

construction

headquarters

3,196,726.00 The final verification report of Wuxi

Huantaihu Expressway finished in

2012 and the payment made in 2013

— 303 —


31 December 2011

Unit: RMB




Wuxi highway

construction

headquarters

3,196,726.00 The final verification report of Wuxi

Huantaihu Expressway finished in

2012 and the payment made in 2013

Aging analysis of accounts payable is as follows:

Unit: RMB

Item

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Within 1 year 3,362,107.57 9,844,385.77 39,744,930.51 6,085,992.72

1-2 years 1,898,600.70 314,871.20 1,069,358.94 3,953,032.20

2-3 years 38,811.70 607,357.70 3,356,126.00 —

Over 3 years 332,538.35 159,873.45 473.45 473.45

Total 5,632,058.32 10,926,488.12 44,170,888.90 10,039,498.37

— 304 —


14. Employee benefits payable

Unit: RMB

1 January

2011

Increase in

the current

year

Decrease in

the current

year

31 December

2011

Increase in

the current

year

Decrease in

the current

year

31 December

2012

Increase in

the current

year

Decrease in

the current

year

December 31

2013

Increase in

the current

period

Decrease in

the current

period

30 September

2014

1. Wages or salaries, bonuses,

allowances and subsidies — 26,710,729.81 -26,710,729.81 — 29,462,364.19 -29,462,364.19 — 32,623,332.41 -32,623,332.41 — 22,278,385.19 -22,278,385.19 —

2. Social security contributions — 2,948,747.65 -2,948,747.65 — 3,219,788.38 -3,219,788.38 — 3,661,106.77 -3,661,106.77 — 2,037,503.99 -2,037,503.99 —

Including: Medical insurance — 2,662,924.30 -2,662,924.30 — 2,901,265.82 -2,901,265.82 — 3,112,555.30 -3,112,555.30 — 1,582,532.13 -1,582,532.13 —

Work injury

insurance — 121,118.45 -121,118.45 — 142,226.65 -142,226.65 — 351,177.02 -351,177.02 — 287,304.14 -287,304.14 —

Maternity

insurance — 164,704.90 -164,704.90 — 176,295.91 -176,295.91 — 197,374.45 -197,374.45 — 167,667.72 -167,667.72 —

3. Housing funds — 2,104,905.00 -2,104,905.00 — 2,242,649.00 -2,242,649.00 — 2,611,246.00 -2,611,246.00 — 2,227,461.00 -2,220,981.00 6,480.00

4. Defined Contribution — 5,549,102.60 -5,549,102.60 — 6,180,213.82 -6,180,213.82 — 6,851,673.27 -6,851,673.27 — 5,849,700.85 -5,849,700.85 —

Including: Basic pension

insurance — 3,747,657.80 -3,747,657.80 — 3,979,930.27 -3,979,930.27 — 4,506,215.16 -4,506,215.16 — 3,848,589.35 -3,848,589.35 —

Annuity scheme — 1,502,586.48 -1,502,586.48 — 1,875,138.00 -1,875,138.00 — 2,082,573.00 -2,082,573.00 — 1,707,489.00 -1,707,489.00 —

Unemployment

insurance — 298,858.32 -298,858.32 — 325,145.55 -325,145.55 — 262,885.11 -262,885.11 — 293,622.50 -293,622.50 —

5. Staff welfare — 1,946,303.00 -1,946,303.00 — 2,085,690.00 -2,085,690.00 — 2,340,598.00 -2,340,598.00 — 2,018,073.30 -2,018,073.30 —

6. Union running and

employees education cost 853,611.71 1,201,982.84 -1,352,730.07 702,864.48 1,325,806.38 -1,386,225.64 642,445.22 1,468,049.96 -1,069,915.12 1,040,580.06 996,848.65 -258,012.90 1,779,415.81

7. Housing subsidy — 1,944,576.00 -1,944,576.00 — 2,028,986.00 -2,028,986.00 — 2,373,377.00 -2,373,377.00 — 2,028,174.00 -2,028,174.00 —

Total 853,611.71 42,406,346.90 -42,557,094.13 702,864.48 46,545,497.77 -46,605,917.03 642,445.22 51,929,383.41 -51,531,248.57 1,040,580.06 37,436,146.98 -36,690,831.23 1,785,895.81

Note:

There is no amount of default nature and non-monetary benefits in the employee benefit payable at the end of the reporting period.

Xiyi Company participates in basic pension insurance, unemployment insurance plan established by government in accordance with the relevant requirements. According to the plan, Xiyi Company makes a monthly contribution equivalent to 20% and 1.5% of the employee’s monthly basic wage based on last year’s salary. Xiyi Company participates in annuity scheme which operated by an independent third party and makes a monthly contribution equivalent to 8.33% of the employee’s monthly basic wage based on last year’s salary. Xiyi Company no longer undertake further payment obligation. The corresponding cost charges to the profit or loss for the current period or the cost of a relevant asset when occur.

For the period from 1 January 2014 to 30 September 2014, Xiyi Company contributes RMB3,848,589.35, RMB1,707,489.00, RMB293,622.50 to basic pension insurance, annuity scheme, unemployment insurance plan respectively (Year 2013: RMB4,506,215.16, RMB2,082,573.00, RMB262,885.11; Year 2012: RMB3,979,930.27, RMB1,875,138.00, RMB325,145.55; Year 2011: RMB3,747,657.80, RMB1,502,586.48, RMB298,858.32). All the contribution had been paid over to the scheme as at 30 September 2014, 31 December 2013, 31 December 2012 and 31 December 2011.

— 305 —


15. Taxes payable

Unit: RMB

Item

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Property Tax — 85,158.93 77,515.01 75,593.82

Business tax 768,388.12 777,863.90 704,318.11 738,479.90

Individual income tax 51,338.03 352,126.82 370,013.13 288,298.51


construction tax 54,087.91 55,632.69 52,343.31 51,631.77

Education surcharge 38,893.36 40,243.21 38,499.32 37,114.80

Land use tax — 47,713.34 47,713.34 47,713.34

Others 9,935.37 28,210.87 68,658.32 3,598.45

Total 922,642.79 1,386,949.76 1,359,060.54 1,242,430.59

16. Other payables

Details of other payables are as follows:

Unit: RMB

Item

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Rural road construction

funds (Note) 21,776,520.30 2,432,365.24 2,186,997.51 2,266,783.79

Others 2,074,416.28 2,401,762.37 1,026,258.29 1,051,492.00

Total 23,850,936.58 4,834,127.61 3,213,255.80 3,318,275.79

Note: Xiyi Company withholds the rural road construction funds according to 10% of the toll revenue.

— 306 —


17. Interest payable

Unit: RMB

Item

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Interest payable of

short-term borrowings 4,499,366.83 3,935,473.36 1,105,694.45 1,383,631.94

Interest payable of long-

term borrowings with interest

payable by installments and

principal payable on maturity 23,961,776.44 10,625,035.59 3,030,026.39 2,547,309.73

Total 28,461,143.27 14,560,508.95 4,135,720.84 3,930,941.67

18. Non-current liabilities due within one year

(1) Details of non-current liabilities due within one year are as follows:

Unit: RMB

Item

30 September

2014

31 December

2013

31 December

2012

31 December

2011



Total 20,000,000.00 285,000,000.00 245,000,000.00 209,000,000.00

— 307 —


(2) Long-term borrowings due within one year

Unit: RMB

Item

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Bank loans 20,000,000.00 285,000,000.00 245,000,000.00 209,000,000.00

Including: Guaranteed

loans 20,000,000.00 35,000,000.00 45,000,000.00 29,000,000.00

Secured loans — 250,000,000.00 200,000,000.00 180,000,000.00

Total 20,000,000.00 285,000,000.00 245,000,000.00 209,000,000.00

Top five long-term borrowings due within one year

30 September 2014

Unit: RMB

LenderInception date

of borrowing Maturity date Currency Interest rate Closing Balance

(%)

Industrial and

Commercial

Bank of

China 29/06/2005 30/05/2015 RMB 6.55 20,000,000.00

Total 20,000,000.00

— 308 —


31 December 2013

Unit: RMB

LenderInception date

of borrowing Maturity date Currency Interest rate Closing Balance

(%)

Industrial and

Commercial

Bank of

China 27/06/2001 20/06/2014 RMB 6.80 250,000,000.00

Industrial and

Commercial

Bank of

China 19/06/2006 30/11/2014 RMB 6.55 15,000,000.00

Industrial and

Commercial

Bank of

China 29/05/2006 30/05/2014 RMB 6.55 10,000,000.00

Industrial and

Commercial

Bank of

China 16/06/2006 30/05/2014 RMB 6.55 5,000,000.00

Bank of China 15/04/2004 20/10/2014 RMB 7.05 5,000,000.00

Total 285,000,000.00

— 309 —


31 December 2012

Unit: RMB

Lender

Inception date

of borrowing Maturity date Currency Interest rate

Closing

Balance

(%)

Industrial and

Commercial

Bank of

China 29/06/2001 20/06/2013 RMB 6.23 70,000,000.00

Industrial and

Commercial

Bank of

China 25/09/2003 20/03/2013 RMB 7.15 35,000,000.00

Industrial and

Commercial

Bank of

China 10/06/2004 20/09/2013 RMB 7.15 30,000,000.00

Industrial and

Commercial

Bank of

China 30/09/2004 20/12/2013 RMB 6.89 30,000,000.00

Industrial and

Commercial

Bank of

China 16/08/2004 20/12/2013 RMB 6.89 15,000,000.00

Total 180,000,000.00

— 310 —


31 December 2011

Unit: RMB

Lender

Inception date


Closing

Balance

(%)

Industrial and

Commercial

Bank of

China 14/04/2003 20/03/2012 RMB 6.69 45,000,000.00

Industrial and

Commercial

Bank of

China 14/04/2003 20/06/2012 RMB 6.69 45,000,000.00

Industrial and

Commercial

Bank of

China 19/09/2003 20/12/2012 RMB 6.69 39,000,000.00

Industrial and

Commercial

Bank of

China 22/04/2003 20/09/2012 RMB 6.89 20,000,000.00

Industrial and

Commercial

Bank of

China 20/06/2003 20/09/2012 RMB 6.89 16,000,000.00

Total 165,000,000.00

— 311 —


19. Long-term borrowings

(1) Categories of long-term borrowings

Unit: RMB

Item

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Bank Loans 382,000,000.00 647,000,000.00 1,012,000,000.00 1,223,000,000.00

Including: Secured loans

(Note 1) — 250,000,000.00 355,000,000.00 535,000,000.00

Guaranteed loan

(Note 2) 382,000,000.00 397,000,000.00 657,000,000.00 688,000,000.00

Loans from a related party 750,000,000.00 500,000,000.00 250,000,000.00 —

Including: Medium Term

Note (Note 3) 750,000,000.00 500,000,000.00 250,000,000.00 —

Subtotal 1,132,000,000.00 1,147,000,000.00 1,262,000,000.00 1,223,000,000.00

Less: long-term

borrowings

due within

one year 20,000,000.00 285,000,000.00 245,000,000.00 209,000,000.00


due after one year 1,112,000,000.00 862,000,000.00 1,017,000,000.00 1,014,000,000.00

Interest of long-term borrowings stated above are as follows: 30 September 2014:

5.60%-7.15%; 31 December 2013: 5.60%-7.05%; 31 December 2012: 5.80%-7.15%;

31 December 2011: 5.94%-7.15%.

Explanation of categories of long-term borrowings:

Note 1: The secured loans please refer to Note VIII (9) for more information about categories and amount of secured assets.


— 312 —


Note 3: Medium Term Notes (“MTN”) represent the bonds issued by Communications Holdings, and allocated to Xiyi Company according to fund use term of the bond prospectus. Xiyi Company paid the corresponding interest and principal to Communications Holdings. The detail of MTN include: (1) Communications Holdings issued MTN”1282514” at 4 December 2012 and allocate RMB250,000,000.00 to Xiyi Company. Bond duration is ten years. Annual interest rate is 5.80%; (2) Communications Holdings issued MTN”1382251” at 16 May 2013 and allocate RMB250,000,000.00 to Xiyi Company. Bond duration is ten years. Annual interest rate is 5.60%; (3) Communications Holdings issued MTN”101461014” at 20 May 2014 and allocate RMB250,000,000.00 to Xiyi Company. Bond duration is five years. Annual interest rate is 6.10%.

Top five long-term borrowings

30 September 2014

Unit: RMB

Lender

Inception date


Closing

Balance

(%)

Communications

Holdings 05/12/2012 05/12/2022 RMB 5.80 250,000,000.00

Communications

Holdings 17/05/2013 17/05/2023 RMB 5.60 250,000,000.00

Communications

Holdings 20/05/2014 20/05/2019 RMB 6.10 250,000,000.00

Ping An Bank of

China 09/01/2004 30/12/2017 RMB 7.05 144,000,000.00

Bank of China 15/04/2004 20/10/2018 RMB 7.05 100,000,000.00

Total 994,000,000.00

— 313 —


31 December 2013

Unit: RMB

Lender

Inception date


Closing

Balance

(%)

Communications

Holdings 05/12/2012 05/12/2022 RMB 5.80 250,000,000.00

Communications

Holdings 17/05/2013 17/05/2023 RMB 5.60 250,000,000.00

Ping An Bank of

China 09/01/2004 30/12/2017 RMB 7.05 144,000,000.00

Bank of China 15/04/2004 20/10/2018 RMB 7.05 100,000,000.00

Industrial and

Commercial

Bank of China 16/03/2004 05/03/2019 RMB 6.55 30,000,000.00

Total 774,000,000.00

31 December 2012

Unit: RMB

Lender

Inception date


Closing

Balance

(%)

Industrial and

Commercial

Bank of China 27/06/2001 20/06/2014 RMB 6.80 250,000,000.00

Communications

Holdings 05/12/2012 05/12/2022 RMB 5.80 250,000,000.00

Ping An Bank of

China 09/01/2004 30/12/2017 RMB 6.80 144,000,000.00

Bank of China 15/04/2004 20/10/2018 RMB 6.80 100,000,000.00

Bank of China 15/04/2004 20/10/2018 RMB 6.80 35,000,000.00

Total 779,000,000.00

— 314 —


31 December 2011

Unit: RMB

Lender

Inception date


Closing

Balance

(%)

Industrial and

Commercial

Bank of China 27/06/2001 20/06/2014 RMB 6.23 250,000,000.00

Ping An Bank of

China 09/01/2004 30/12/2017 RMB 6.14 144,000,000.00

Bank of China 15/04/2004 20/10/2018 RMB 5.94 100,000,000.00

Industrial and

Commercial

Bank of China 29/06/2001 20/06/2013 RMB 6.23 70,000,000.00

Bank of China 15/04/2004 20/10/2018 RMB 5.94 35,000,000.00

Total 599,000,000.00

Analysis of maturity for long-term borrowings over 1 year is as follows:

Unit: RMB

Item

30 September

2014

31 December

2013

31 December

2012

31 December

2011

1-2 years 40,000,000.00 40,000,000.00 280,000,000.00 225,000,000.00

2-5 years 572,000,000.00 302,000,000.00 259,000,000.00 356,000,000.00

Over 5 years 500,000,000.00 520,000,000.00 478,000,000.00 433,000,000.00

Total 1,112,000,000.00 862,000,000.00 1,017,000,000.00 1,014,000,000.00

— 315 —


20. Share capital

Unit: RMB

30 September 2014, 31 December 2013,


Investors Amount Proportion

(%)

Communications Holdings 646,170,000.00 78

Wuxi Expressway Investment

Company Limited 138,250,000.00 17

Changzhou Expressway Investment

Development Company Limited 39,750,000.00 5

Total 824,170,000.00 100

21. Accumulated Losses

Unit: RMB

Item

From1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)


Opening balance -161,392,010.79 -133,389,271.74 -133,389,271.74 -112,157,761.20 -105,454,805.72

Add: Net loss of

current year

(period) -3,411,231.47 -10,392,063.43 -28,002,739.05 -21,231,510.54 -6,702,955.48


Closing balance -164,803,242.26 -143,781,335.17 -161,392,010.79 -133,389,271.74 -112,157,761.20

— 316 —


22. Operating income, operating costs

(1) Operating income, operating costs

Unit: RMB


30 September 2014

From 1 January 2013 to 30

September 2013 (Unaudited)

Item Operating income Operating costs Operating income Operating costs

Principal operating

income 205,989,061.25 110,760,570.17 193,442,819.17 100,163,227.04

Including: Toll revenue 202,729,547.57 101,214,313.57 190,622,058.96 91,051,789.85

Ancillary

services 3,259,513.68 9,546,256.60 2,820,760.21 9,111,437.19

Other operating income 1,639,350.90 506,321.90 1,225,584.85 497,900.70

Including: Rental

and other 1,639,350.90 506,321.90 1,225,584.85 497,900.70

Total 207,628,412.15 111,266,892.07 194,668,404.02 100,661,127.74


Item

Operating

income

Operating

costs

Operating

income

Operating

costs

Operating

income

Operating

costs

Principal operating income 259,938,909.85 148,528,915.75 247,434,557.68 124,722,355.73 255,778,688.71 126,561,876.45

Including: Toll revenue 256,048,264.96 134,597,903.62 243,771,531.50 111,604,460.68 251,548,054.71 113,735,009.58

Ancillary

services 3,890,644.89 13,931,012.13 3,663,026.18 13,117,895.05 4,230,634.00 12,826,866.87

Other operating income 2,804,225.36 724,623.45 4,710,723.77 823,501.71 3,717,247.02 754,205.20

Including: Rental and other 2,804,225.36 724,623.45 4,710,723.77 823,501.71 3,717,247.02 754,205.20

Total 262,743,135.21 149,253,539.20 252,145,281.45 125,545,857.44 259,495,935.73 127,316,081.65

— 317 —


(2) Principal operating activities (classified by geographical areas): The principal

operation activities of Xiyi Company are located and carried out in Jiangsu

Province.

(3) The operating income from Xiyi Company top five customers: the operating

income principally includes the toll revenue and ancillary services income etc.

Xiyi Company is unable to present top five customers because of the nature of the

business.

23. Business taxes and levies

Unit: RMB

Item

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

Business tax 6,205,090.68 5,821,000.25 7,860,899.22 7,609,590.79 7,865,986.17


construction tax 439,469.68 412,143.85 557,198.52 535,650.22 551,001.34

Education surcharge 317,169.50 297,047.41 402,159.82 387,645.02 398,164.27

Others 6,673.92 6,158.74 9,311.88 16,126.89 16,730.20

Total 6,968,403.78 6,536,350.25 8,829,569.44 8,549,012.92 8,831,881.98

— 318 —


24. Administrative expenses

Unit: RMB

Item

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

Employee benefits

expenses 6,246,737.24 5,243,841.82 8,408,588.99 8,106,529.11 6,809,260.16

Depreciation and

amortization 1,151,456.46 1,107,397.36 1,544,500.61 1,402,734.44 994,322.99

Audit fee 140,000.00 140,000.00 140,000.00 140,000.00 135,000.00

Consulting and

intermediary

service fee 51,500.00 52,016.00 52,016.00 208,317.00 50,680.00

Property taxes and

other taxes 316,008.84 311,751.04 577,495.58 552,788.24 462,451.95

Entertainment fee 125,967.70 282,468.24 340,120.24 849,567.61 1,231,671.32

Maintenance and

repair costs 23,942.00 7,605.00 24,290.00 47,037.46 50,168.00

Office expenses 33,427.66 34,265.75 53,825.31 65,809.44 130,847.90

Travelling expenses 85,450.00 252,298.40 334,389.40 312,866.00 419,682.50

Vehicle related

expenses 346,757.33 385,375.29 688,180.07 584,636.29 675,191.94

Others 460,692.23 536,587.31 903,827.19 944,280.61 1,120,742.90

Total 8,981,939.46 8,353,606.21 13,067,233.39 13,214,566.20 12,080,019.66

— 319 —


25. Financial expenses

Unit: RMB

Item

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

Interest expense 83,538,287.32 88,816,061.88 120,163,652.20 126,972,320.58 119,258,474.67

Including: Wholly

repayable

within

five

years 62,221,848.96 62,775,500.19 84,932,085.61 109,081,463.32 88,235,460.77

Not wholly

repayable

within

five

years 21,316,438.36 26,040,561.69 35,231,566.59 17,890,857.26 31,023,013.90

Less: Interest

income 329,266.99 343,681.21 645,621.98 2,081,232.11 1,805,799.61

Others 40,247.61 43,951.58 57,643.49 63,396.35 59,469.81

Total 83,249,267.94 88,516,332.25 119,575,673.71 124,954,484.82 117,512,144.87

— 320 —


26. Non-operating income

Unit: RMB

Item

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

Compensation income

from damaged road — — 946,263.15 946,425.55 1,254,104.27

Others 67,792.00 78,033.00 47,896.37 86,752.59 97,477.21

Total 67,792.00 78,033.00 994,159.52 1,033,178.14 1,351,581.48

27. Non-operating expenses

Unit: RMB

Item

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

Total loss on disposal

of non-current assets 35,255.81 — 70,639.07 196,119.50 20,988.70

Including: Losses on

disposal

of fixed

assets 35,255.81 — 70,639.07 196,119.50 20,988.70

Repair expenditure of

damaged road 410,000.00 1,035,000.00 744,383.00 1,676,130.00 1,534,478.40

Others 195,676.56 36,084.00 197,851.89 260,373.24 254,877.43

Total 640,932.37 1,071,084.00 1,012,873.96 2,132,622.74 1,810,344.53

— 321 —


28. Income tax expenses

Unit: RMB

Item

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

Current tax expense

calculated

according to tax

laws and relevant

requirements — — 1,144.08 13,426.01 —

Deferred income tax

expense — — — — —

Total — — 1,144.08 13,426.01 —

No provision for Hong Kong Profits Tax has been made as the income neither arises, nor

is derived from Hong Kong.

Reconciliation of income tax expenses to the accounting loss is as follows:

Unit: RMB

Item

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

Accounting Loss -3,411,231.47 -10,392,063.43 -28,001,594.97 -21,218,084.53 -6,702,955.48

Income tax expenses

calculated at 25% -852,807.87 -2,598,015.86 -7,000,398.74 -5,304,521.13 -1,675,738.87

Effect of expenses that

are not deductible

for tax purposes 147,353.21 105,794.30 319,889.97 366,908.87 228,252.83

Tax effect of

unrecognized

deductible losses 705,454.66 2,492,221.56 6,681,652.85 4,951,038.27 1,447,486.04

Income tax expenses — — 1,144.08 13,426.01 —

— 322 —


29. Supplementary information to the statement of profit or loss and other

comprehensive income

Unit:RMB

Item

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

Outsourcing

service fee 4,957,480.51 5,636,341.54 10,160,599.54 9,129,279.73 11,496,413.69

Maintenance

and repair fee 3,648,980.99 3,543,997.66 4,921,524.30 6,531,436.58 4,005,880.97

Network

management fee 1,019,286.47 695,776.07 1,523,665.68 1,201,522.06 1,306,216.31

Equipment usage fee 198,596.53 349,257.03 377,572.36 377,572.36 358,180.69

Patrol fee 1,412,890.62 1,531,303.00 2,791,303.00 2,792,713.22 2,879,080.80

Energy costs 1,510,425.01 1,444,845.14 2,152,847.13 1,863,458.05 2,154,365.40

Usage of raw materials 1,652,968.98 1,363,192.02 1,970,329.90 867,728.09 1,186,620.57

Employee benefits

expenses 37,436,146.98 33,178,267.70 51,929,383.41 46,545,497.77 42,406,346.90

Depreciation

and amortization 63,739,673.07 55,229,329.25 76,695,303.39 58,584,076.73 61,159,377.39


Others 4,383,362.99 5,742,694.91 9,210,265.39 8,849,303.29 10,697,288.79

Total 203,498,099.47 197,531,066.20 281,896,446.30 263,714,908.46 256,908,246.18

30. Earnings per share

Earnings per share are not presented as it is not considered meaningful with regard to this

Financial Information.

— 323 —


31. Notes to items in the statement of cash flows

(1) Other cash receipts relating to operating activities

Unit: RMB

Item

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

Collection of funds for

construction of rural

roads 19,344,155.06 260,290.85 245,367.73 — —

Highways received

compensation

payments and non-

operating income

projects 790,544.61 844,811.04 960,565.92 1,440,202.05 1,702,442.91

Interest received on

bank deposits 329,266.99 343,681.21 645,621.98 2,081,232.11 1,805,799.61

Total 20,463,966.66 1,448,783.10 1,851,555.63 3,521,434.16 3,508,242.52

— 324 —


(2) Other cash payments relating to operating activities

Unit: RMB

Item

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

Payment of non-

salary and other

expenditure 2,601,183.61 3,176,212.48 3,913,516.80 6,148,208.63 7,831,513.31

The expenditure of

the collection of

rural highway

construction fund — — — — 4,297,689.22

Total 2,601,183.61 3,176,212.48 3,913,516.80 6,148,208.63 12,129,202.53

(3) Other cash receipts relating to investing activities: N/A

(4) Other cash payments relating to investing activities: N/A

(5) Other cash receipts relating to financing activities

Unit: RMB

Item

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

Receipt of the

money deposited

in the financial

settlement center

of Communications

Holdings — — — 87,378,664.51 —

Total — — — 87,378,664.51 —

— 325 —


(6) Other cash payments relating to financing activities

Unit: RMB

Item

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

Payment of the

money deposited

in the financial

settlement center

of Communications

Holdings — — — — 66,806,151.92

Total — — — — 66,806,151.92

— 326 —


32. Supplementary information to the statement of cash flows

(1) Supplementary information to the statement of cash flows

Unit: RMB

Supplementary information

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30

September 2013

(Unaudited)

1. Reconciliation of net loss to cash flow

from operating activities:

Net loss -3,411,231.47 -10,392,063.43

Add: Depreciation of fixed assets 13,276,761.74 16,331,952.02

Amortization of intangible assets 50,462,911.33 38,897,377.23


assets and other long-term assets

(gains are indicated by “–”) 35,255.81 —

Financial expenses

(income is indicated by “–”) 83,538,287.32 88,816,061.88


(increase is indicated by “–”) 42,817.68 16,426.59

Decrease in receivables from


(increase is indicated by “–”) 216,666.62 -3,070,963.15



(decrease is indicated by “–”) 14,083,924.35 -1,533,100.87

Net cash flow from operating activities 158,245,393.38 129,065,690.27


cash equivalents:

Closing balance of cash 45,946,715.49 76,869,567.27

Less: Opening balance of cash 24,048,313.11 67,937,066.35

Net increase (decrease) in cash and

cash equivalents 21,898,402.38 8,932,500.92

— 327 —


Supplementary

information Year 2013 Year 2012 Year 2011

1. Reconciliation of net loss to cash


Net loss -28,002,739.05 -21,231,510.54 -6,702,955.48

Add: Depreciation of fixed assets 24,832,133.75 22,445,861.70 22,428,594.00

Amortization of

intangible assets 51,863,169.64 36,138,215.03 38,730,783.39


assets and other long-term

assets (gains are indicated

by “–”) 70,639.07 196,119.50 20,988.70

Financial expenses(income

is indicated by “–”) 120,163,652.20 126,972,320.58 119,258,474.67



by “–”) -6,869.06 -58,448.83 17,225.02

Decrease in receivables

from operating activities


by “–”) 144,593.50 -70,820.50 8,352,484.38



(decrease is indicated

by “–”) 45,796.70 5,008,505.62 -6,074,616.74

Net cash flow from

operating activities 169,110,376.75 169,400,242.56 176,030,977.94


cash equivalents:

Closing balance of cash 24,048,313.11 67,937,066.35 10,839,693.69

Less: Opening balance of cash 67,937,066.35 10,839,693.69 19,647,891.54

Net increase (decrease) in cash

and cash equivalents -43,888,753.24 57,097,372.66 -8,808,197.85

— 328 —


(IX) RELATED PARTY RELATIONSHIP AND TRANSACTIONS

1. Parent company of Xiyi Company

Unit: RMB

Name of the

parent company

Related party

relationship

Type of

the Xiyi

Company Registry

Legal

representative

Nature

of business

Registered

capital

Proportion

of Xiyi

Company’s

ownership

interest

held by

the parent

Proportion

of Xiyi

Company’s

voting

power held

by the

parent

Ultimate

controlling

party of

Xiyi Company

Organization

code

(%) (%)

Communications

Holdings

Parent company

and ultimate

shareholder

State owned Nanjing,

Jiangsu

Province

Chang Qing Investment, construction,

operation and management

of traffic infrastructure,

transportation and

other relevant industry

16,800,000,000 78.4 78.4 Communications

Holdings

13476706-3

2. Other related parties of Xiyi Company



other related parties

and Xiyi Company Organization code

Jiangsu expressway network operation and

Management Company Limited

(“Network Operation Company”)

Same Ultimate

Shareholder

77050954-0

Jiangsu Sundian Engineering

Co., Ltd. (“Sundian”)

Same Ultimate

Shareholder

74821796-3

Jiangsu Expressway Petroleum

Development Co., Ltd.

(“Expressway Petroleum Company”)

Same Ultimate

Shareholder

73572481-9

Jiangsu Communications Holdings Group

Finance Company Limited

(“Group Finance Company”)

Same Ultimate

Shareholder

58843422-0

Jiangsu Runyang Bridge Development

Company Limited (“Runyang Bridge”)

Same Ultimate

Shareholder

73225111-2

— 329 —




other related parties

and Xiyi Company Organization code

Jiangsu Expressway Information

Engineering Co., Ltd.

(“Information Company”)

Same Ultimate

Shareholder

58843422-0

Jiangsu Fenguan Expressway Management

Limited (“Fenguan Expressway”)

Same Ultimate

Shareholder

76358446-2

Jiangsu Jinghu Expressway Co., Ltd.

(“Jinghu Expressway”)

Same Ultimate

Shareholder

57952256-0

Jiangsu Expressway Co., Ltd

(“Jiangsu Expressway”)

Same Ultimate

Shareholder

13476276-4

Jiangsu Guangjing Xicheng Expressway

Co., Ltd (“Guangjing Xicheng”)

Same Ultimate

Shareholder

71408945-7

Jiangsu Lianxu Expressway Co., Ltd.

(“Lianxu Expressway”)

Same Ultimate

Shareholder

77804509-0

Jiangsu Sutong Bridge Co., Ltd.

(“Su Tong Bridge”)

Same Ultimate

Shareholder

70404938-X

Jiangsu Yanjiang Expressway Co., Ltd.

(“Yanjiang Expressway”)

Same Ultimate

Shareholder

74133947-4

Jiangsu HuaTong Engineering

Testing Co., Ltd. (“Huatong Testing”)

Same Ultimate

Shareholder

71409204-X

Suzhou Sujiahang Expressway Co., Ltd.

(“Sujiahang Expressway”)

Same Ultimate

Shareholder

13776920-8

Jiangsu Suhuanyan Highway Management

Company Limited

(“Suhuanyan Highway”)

Same Ultimate

Shareholder

77543562-4

Jiangsu Ninghang Expressway Co., Ltd.


Same Ultimate

Shareholder

73441778-9

Jiangsu Ocean Shipping Co. Ltd.

(“Ocean Shipping”)

Same Ultimate

Shareholder

13476224-9

Suzhou Circular Expressway

Company Limited (“Suzhou Circle”)

Same Ultimate

Shareholder

74313200-4

— 330 —


3. Related party transactions

(1) Sales and purchase of goods, provision and receipt of service

Unit: RMB


30 September 2014



Related

Type of

related party

transactions

Details of related


Proportion of

the amount of

related party

transactions to

that of similar

transactions Amount

Proportion of

the amount of

related party

transactions to

that of similar

transactions

(%) (%)

Sundian Receive Service Road maintenance

and repair

service fees

4,635,000.00 100 3,343,500.00 100

Network

Operation

Company

Receive Service Networking

charge service

fees

1,019,286.47 100 1,142,749.26 100

Huatong Testing Receive Service Bridge inspection

and

maintenance

fees

391,900.00 100 325,991.25 100

Information

Company

Receive Service Communication

system

maintenance

fees

260,750.00 100 258,343.00 100

Network

Operation

Company

Provide Service ETC customer

network

management

fee

— — 34,322.25 100

— 331 —



Related

Type of

related party

transactions

Details of related


Proportion

of the

amount of

related party

transactions

to that of

similar

transactions Amount

Proportion

of the

amount of

related party

transactions

to that of

similar

transactions Amount

Proportion

of the

amount of

related party

transactions

to that of

similar

transactions

(%) (%) (%)

Sundian Receive

Service

Road maintenance

and repair service

fees

5,474,284.00 100 6,339,231.49 100 5,939,490.96 100

Network

Operation

Company

Receive

Service

Networking charge

service fees

1,523,665.68 100 1,201,522.06 100 — —

Huatong

Testing

Receive

Service

Bridge inspection

and maintenance

fees

434,655.00 100 261,500.00 100 — —

Information

Company

Receive

Service

Communication

system

maintenances fees

1,179,943.00 100 420,500.00 100 543,109.00 100

Network

Operation

Company

Provide

Service

ETC customer

network

management fee

45,763.00 100 45,338.98 100 20,411.20 100

— 332 —


(2) Interest expense of borrowings and Interest income of deposit

Unit: RMB


30 September 2014



Related

Type of

related party

transactions

Details of related


Proportion of

the amount of

related party

transactions to

that of similar

transactions Amount

Proportion of

the amount of

related party

transactions to

that of similar

transactions

(%) (%)

Group Finance

Company


bank deposits

271,216.27 82 274,668.35 80

Communications

Holdings



center

— — — —

Communications

Holdings

Lending

of funds

Interest expenses of a

related party loan

35,777,707.56 43 22,383,827.06 25

Group Finance

Company

Lending

of funds

Interest expenses of the


20,590,888.86 25 25,921,162.48 29

Network

Operation

Company

Lending

of funds


entrusted loan

5,309,408.60 6 5,686,791.67 6

Yanjiang

Expressway

Lending

of funds


entrusted loan

3,938,064.52 5 4,770,500.00 5

Communications

Holdings

Lending

of funds


entrusted loan

3,119,139.78 4 6,358,483.33 7

Suhuanyan

Highway

Lending

of funds


entrusted loan

1,350,000.00 2 1,430,500.00 2

Jinghu

Expressway

Lending

of funds


entrusted loan

— — 2,949,333.33 3

Ocean Shipping Lending

of funds


entrusted loan

— — — —

— 333 —



Related

Type of

related party

transactions

Details of related


Proportion

of the

amount of

related party

transactions

to that

of similar

transactions Amount

Proportion

of the

amount of

related

party

transactions

to that of

similar

transactions Amount

Proportion

of the

amount of

related party

transactions

to that of

similar

transactions

(%) (%) (%)

Group Finance

Company


bank deposits

560,586.15 87 52,844.67 3 — —

Communications

Holdings



center

— — 1,781,611.73 86 1,535,450.92 85

Communications

Holdings

Lending

of funds

Interest expenses of a

related party loan

29,845,102.74 25 1,087,500.00 1 — —

Group Finance

Company

Lending

of funds

Interest expenses of the


34,561,549.97 29 21,161,461.11 17 — —

Network Operation

Company

Lending

of funds


entrusted loan

7,582,388.89 6 — — — —

Yanjiang Expressway Lending

of funds


entrusted loan

6,360,666.67 5 — — — —

Communications

Holdings

Lending

of funds


entrusted loan

8,477,977.78 7 33,712,058.61 27 17,290,738.61 14

Suhuanyan Highway Lending

of funds


entrusted loan

1,907,333.33 2 1,618,133.33 1 — —

Jinghu Expressway Lending

of funds


entrusted loan

3,932,444.44 3 734,222.22 1 — —

Ocean Shipping Lending

of funds


entrusted loan

— — — — 2,410,150.00 2

— 334 —


(3) Leases with related parties

Unit: RMB

Lease income

Name of

lessor

Name of

lessee

Type of

leased assets

Involve

amount of the

leased assets

Leasing

begin date

Leasing

ending

date

From 1

January

2014 to 30

September

2014

From 1

January

2013 to 30

September

2013

The basis for

determining

Lease income

Impact of

lease income

on Xiyi

Company

(Unaudited)

Xiyi

Company

Expressway

Petroleum

Company

Gas station

property

706,684.25 1 July

2008

31

December

2014

375,200.00 409,000.00 With the recovery

of the cost of

the leased asset

and Profit as the

basic principle,

at the same time

Considering the

effect of taxes

Not

significant

Lease income

Name of

lessor

Name of

lessee

Type of

leased

assets

Involve

amount

of the leased

assets

Leasing

begin date

Leasing

ending date Year 2013 Year 2012 Year 2011

The basis for

determining

Lease income

Impact of

lease income

on Xiyi

Company

Xiyi

Company

Expressway

Petroleum

Company

Gas station

property

706,684.25 1 July 2008 31 December

2014

833,100.00 1,111,400.00 1,273,700.00 With the recovery

of the cost of

the leased asset

and Profit as the

basic principle,

at the same time

Considering the

effect of taxes

Not significant

— 335 —


(4) Guarantees with related parties

Guarantor

Guaranteed

party

Guaranteed

amount

Inception date

of guarantee

Expiration date

of guarantee

Whether execution

of guarantee has

been completed

Communications

Holdings Xiyi Company 300,000,000.00 16/03/2004 05/03/2019 Not completed

Communications


Communications


(5) Borrowings/loans with related parties

During the period of 1 January 2014 to 30 September 2014:

Unit: RMB

Related party

Borrowing (Repayment)

Amount Inception date Maturity dateAmount at the


Borrowed FromGroup Finance Company

-30,000,000.00 02/08/2013 01/08/2014 — Working capital loan with annual interest of 5.60%

Group Finance Company

— 29/11/2013 28/11/2014 50,000,000.00 Working capital loan with annual interest of 5.60%


— 18/12/2013 17/12/2014 20,000,000.00 Working capital loan with annual interest of 5.60%


50,000,000.00 03/03/2014 02/03/2015 50,000,000.00 Working capital loan with annual interest of 5.70%






— 05/12/2012 05/12/2022 250,000,000.00 Loan from a related party, with annual interest rate of 5.80%



— 336 —


Unit: RMB

Related party





-80,000,000.00 17/07/2013 16/01/2014 — Entrusted loan with annual interest of 5.60%




-200,000,000.00 13/09/2013 12/03/2014 — Loan from a related party, with annual interest rate of 5.30%


200,000,000.00 22/02/2014 22/05/2014 — Loan from a related party, with annual interest rate of 6.60%


-200,000,000.00 22/02/2014 22/05/2014 — Loan from a related party, with annual interest rate of 6.60%


200,000,000.00 25/04/2014 25/04/2015 200,000,000/00 Loan from a related party, with annual interest rate of 5.60%


250,000,000.00 20/05/2014 20/05/2019 250,000,000.00 Loan from a related party, with annual interest rate of 6.10%

Network Operation Company







75,000,000.00 12/03/2014 11/03/2015 75,000,000.00 Entrusted loan with annual interest of 6.00%



Suhuanyan Highway -30,000,000.00 13/03/2013 12/03/2014 — Entrusted loan with annual interest of 6.00%

Suhuanyan Highway 30,000,000.00 05/03/2014 04/03/2015 30,000,000.00 Entrusted loan with annual interest of 5.60%

Yanjiang Expressway -30,000,000.00 13/03/2013 12/03/2014 — Entrusted loan with annual interest of 6.00%

Yanjiang Expressway 80,000,000.00 09/01/2014 08/07/2014 — Entrusted loan with annual interest of 5.60%

— 337 —


Unit: RMB

Related party





Yanjiang Expressway 30,000,000.00 07/03/2014 06/09/2014 — Entrusted loan with annual interest of 5.60%


Yanjiang Expressway 30,000,000.00 10/07/2014 09/01/2015 30,000,000.00 Entrusted loan with annual interest of 5.60%



Lend toN/A

— 338 —


During the period of 1 January 2013 to 30 September 2013 (Unaudited):

Unit: RMB

Related party


Amount Inception date Maturity date

Amount at the end of the

current period Remarks

Borrowed fromGroup Finance Company








— 339 —


Unit: RMB

Related party
















50,000,000.00 15/03/2013 29/05/2013 — Entrusted loan with annual interest of 5.60%















Jinghu Expressway 80,000,000.00 07/03/2013 06/09/2013 — Entrusted loan with annual interest of 5.60%

Jinghu Expressway -80,000,000.00 07/03/2013 06/09/2013 — Entrusted loan with annual interest of 5.60%


— 340 —


Unit: RMB

Related party





















YanJiang Expressway 100,000,000.00 22/02/2013 21/08/2013 — Entrusted loan with annual interest of 5.60%

YanJiang Expressway -100,000,000.00 22/02/2013 21/08/2013 — Entrusted loan with annual interest of 5.60%

YanJiang Expressway 30,000,000.00 13/03/2013 12/03/2014 30,000,000.00 Entrusted loan with annual interest of 6.00%


Lend toN/A

— 341 —


Year 2013

Unit: RMB

Related party




current year Remarks

Borrowed fromGroup Financial Company




























— 342 —


Unit: RMB

Related party


















Jinghu Expressway 80,000,000.00 07/03/2013 06/09/2013 — Entrusted loan with annual interest of 5.60%
















— 343 —


Unit: RMB

Related party







YanJiang Expressway 100,000,000.00 22/02/2013 21/08/2013 — Entrusted loan with annual interest of 6.00%

YanJiang Expressway -100,000,000.00 22/02/2013 21/08/2013 — Entrusted loan with annual interest of 6.00%



Lend toN/A

— 344 —


Year 2012

Unit: RMB

Related party





Borrowed fromGroup Finance Company




























— 345 —


Unit: RMB

Related party















Jinghu Expressway 80,000,000.00 19/07/2012 18/07/2013 80,000,000.00 Entrusted loan with annual interest of 5.60%


Lend toN/A

— 346 —


Year 2011

Unit: RMB

Related party





Borrowed fromCommunications Holdings




























— 347 —


Unit: RMB

Related party







Ocean Shipping -100,000,000.00 28/01/2011 27/07/2011 — Entrusted loan with annual interest of 5.05%

Lend toN/A

(6) Compensation for key management personnel

Unit: RMB

Item

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

Compensation for key

management

personnel 1,140,878.00 1,297,726.00 1,722,298.00 1,572,699.00 1,636,988.10

— 348 —


4. Amount due from and due to related parties

(1) Deposit in related parties

Unit: RMB

Related party

30 September

2014

31 December

2013

31 December

2012

31 December

2011

Group Finance

Company 36,312,206.85 9,520,931.71 19,316,097.92 —

(2) Amount due from related parties

Unit: RMB


Item Related party

Carrying

amount

Bad debt

provision

Carrying

amount

Bad debt

provision

Carrying

amount

Bad debt

provision

Carrying

amount

Bad debt

provision

Accounts receivable

(note)

Expressway

Petroleum

Company

— — 215,500.00 — 273,700.00 — 392,600.00 —

Subtotal — — 215,500.00 — 273,700.00 — 392,600.00 —

Other receivables Communications

Holdings

— — — — — — 87,378,664.51 —

Subtotal — — — — — — 87,378,664.51 —

Note: At 30 September 2014, 31 December 2013, 31 December 2012 and 31 December 2011, besides the accounts receivable of gas station lease from Expressway Petroleum Company stated above, there are split toll road fee receivables from Toll Road Network Companies which amounted to RMB3,881,925.54, RMB3,226,775.99, RMB2,818,291.65 and RMB2,711,034.00 in respect. The ultimate shareholder of those Toll Road Network Companies is Communications Holdings, except for which Xiyi Company has no other control, joint control or significant influence relationship with them.

— 349 —


(3) Amount due to related parties

Unit: RMB

Item Related party

30 September

2014

30 December

2013

31 December

2012

31 December

2011

Accounts payable

(Note)

Sundian 1,652,836.70 2,515,951.77 2,425,518.20 276,507.00

Information Company 337,550.00 335,143.00 — —

Huatong Testing 43,465.00 434,655.00 260,000.00 —

Network Operation

Company

— 286,822.00 112,828.00 176,046.00

Subtotal 2,033,851.70 3,572,571.77 2,798,346.20 452,553.00

Interest payable Communications

Holdings

26,916,885.65 12,320,273.99 1,087,500.00 —

Group Finance

Company

667,777.78 833,555.56 1,000,116.67 —

Subtotal 27,584,663.43 13,153,829.55 2,087,616.67 —

Note: At 30 September 2014, 31 December 2013, 31 December 2012 and 31 December 2011, besides the accounts payable of Road maintenance fee, Communication system maintenance, Bridge inspection and maintenance and network service fee, there are split toll road fee payables from Toll Road Network Companies which amounted to RMB116,715.00, RMB3,533,029.00, RMB5,753,714.00 and RMB2,030,470.86 in respect. The ultimate shareholder of those Toll Road Network Companies is Communications Holdings, except for which Xiyi Company has no other control, joint control or significant influence relationship with them.

— 350 —


5. Directors’ emoluments


Unit: RMB


Salaries and

other benefits

Basic pension

and annuity

scheme Total

Directors

Yang Fei — — — —

Wang Qin — — — —

Wang Guoxin — — — —


Cao Hengjin — 301,485.13 36,074.87 337,560.00

Supervisers

Yang laxiang — 187,211.75 19,841.25 207,053.00

Jin Xiangdong — — — —

Liu Jianchun — — — —

Total — 488,696.88 55,916.12 544,613.00

— 351 —



Unit: RMB


Salaries and

other benefits

Basic pension

and annuity

scheme Total

Directors





Cao Hengjin — 291,182.00 35,100.00 326,282.00

Supervisors

Yang laxiang — 183,056.00 19,305.00 202,361.00



Total — 474,238.00 54,405.00 528,643.00

— 352 —


Year 2013

Unit: RMB


Salaries and

other benefits

Basic pension

and annuity

scheme Total

Directors





Cao Hengjin — 388,242.00 46,800.00 435,042.00

Supervisors

Yang laxiang — 244,074.00 25,740.00 269,814.00



Total — 632,316.00 72,540.00 704,856.00

— 353 —


Year 2012

Unit: RMB


Salaries and

other benefits

Basic pension

and annuity

scheme Total

Directors





Kong Weifeng (Retired

on 5 November 2012) — 336,903.00 42,900.00 379,803.00

Cao Hengjin (Appointed

on 5 November 2012) — 151,372.00 17,875.00 169,247.00

Supervisors

Yang laxiang — 207,708.00 23,595.00 231,303.00



Total — 695,983.00 84,370.00 780,353.00

— 354 —


Year 2011

Unit: RMB


Salaries and

other benefits

Basic pension

and annuity

scheme Total

Directors

Ni Renjie (Retired on 22

December 2011) — — — —

Yang Fei (Appointed on

22 December 2011) — — — —




Tao Rongqing (Retired on

22 December 2011) — 347,197.62 42,900.00 390,097.62

Kong Weifeng

(Appointed on 22

December 2011) — 318,487.62 38,610.00 357,097.62

Supervisors

Yang laxiang — 218,002.62 23,595.00 241,597.62



Total — 883,687.86 105,105.00 988,792.86

Note: Some directors of Xiyi Company were also the employees of the shareholders and their remuneration were paid for and borne by the shareholders during the Track Record Period. In the opinion of the directors of Xiyi Company, there is no reasonable basis to allocate their remuneration to Xiyi Company.

— 355 —


6. Five individuals with the highest emoluments

Top five highest emoluments individuals are as follows. Two (From 1 January to

September 2013: Two; Year 2013: Two; Year 2012: Three; Year 2011: Three) of the five

individuals with the highest emoluments in Xiyi Company are directors or supervisors

of Xiyi Company whose emoluments are included in note of directors’ emoluments. The

emoluments of the remaining three (From 1 January to September 2013: Three; Year

2013: Three; Year 2012: Two; Year 2011: Two) individuals were as follows:

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

Salaries and

other benefits 533,133.75 690,108.00 913,182.00 558,966.00 579,555.24

Basic pension

and annuity scheme 63,131.25 78,975.00 104,260.00 68,640.00 68,640.00

Total 596,265.00 769,083.00 1,017,442.00 627,606.00 648,195.24

Salary range

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30

September 2013 Year 2013 Year 2012 Year2011

(Unaudited)

Less than HKD

1,000,000 3 3 3 2 2

— 356 —


(X) SEGMENT REPORT

Based on the internal organization structure, management requirements and internal reporting

system, for above 90% of operating income comes from toll revenue, Xiyi Company recognizes

toll road business and other business as the only one segment.

Segment information is disclosed in accordance with the accounting policies and measurement

criteria adopted by the segment when reporting to management. The measurement criteria are

consistent with the accounting and measurement criteria in the preparation of the Financial

Information.

(1) Segment information

For above 90% of operating income comes from toll revenue, the segment information

is consistent with the information in the statement of financial position and statement of

profit or loss and other comprehensive income.

(2) Segment revenue arising from external transactions by business

Details please refer to Note VIII 22.

(3) External revenue by geographical area of source and non-current assets by

geographical location

All income and assets of the Xiyi Company are from/located in PRC.

(4) Degree of reliance on major customers

The principle activities are toll roads operation and ancillary services along toll roads etc.

therefore there is no reliance on specific customers.

(XI) FINANCIAL INSTRUMENT AND RISK MANAGEMENT

Xiyi Company’s major financial instruments include cash and bank balances, equity investments,

borrowings, accounts receivable, other receivables, accounts payable, other payables etc.

Details of these financial instruments are disclosed in notes VIII. The risks associated with

these financial instruments and the policies on how to mitigate these risks are set out below.

Management manages and monitors these exposures to ensure the risks are monitored at a

certain level.

— 357 —


1. Risk management objectives and policies

Xiyi Company’s risk management objectives are to achieve a proper balance between

risks and yield, minimise the adverse impacts of risks on Xiyi Company’s operation

performance, and maximise the benefits of the shareholders and other stakeholders. Based

on these risk management objectives, Xiyi Company’s basic risk management strategy is

to identify and analyze Xiyi Company’s exposure to various risks, establish an appropriate

maximum tolerance to risk, implement risk management, and monitors regularly and

effectively these exposures to ensure the risks are monitored at a certain level.

1.1. Market Risk

1.1.1. Foreign Currency Risk

The management of Xiyi Company thinks that the major and continuing

transaction of Xiyi Company are denominated and settled in RMB,

the currency risk may have no significant impact on Xiyi Company’s

performance.

1.1.2. Interest rate risk - risk of changes in cash flows

Xiyi Company’s cash flow interest rate risk of financial instruments relates

primarily to variable interest rate borrowings. Xiyi Company’s policy is

to keep the variable interest rate. As at 30 September 2014, borrowings

with variable interest rate mainly include short-term borrowings RMB0

(31 December 2013: RMB0; 31 December 2012: RMB50,000,000.00;

31 December 2011: RMB180,000,000.00) and long-term borrowings

(including long-term borrowings due within one year) RMB382,000,000.00

(31 December 2013: RMB647,000,000.00; 31 December 2012:

RMB1,012,000,000.00; 31 December 2011: RMB1,223,000,000.00).

Sensitivity analysis

The sensitivity analysis on interest rate risk is based on the following

assumptions: changes in the market interest rate may influence the interest

income or expense of the variable rate financial instruments. For variable-

rate short-term and long-term borrowings, the analysis is prepared assuming

the amount of liability outstanding at the end of the reporting period was

outstanding for the whole year. A 50 basis point increase or decrease is used

and represents management’s assessment of the reasonably possible change

in interest rates.

— 358 —


If interest rates had been 50 basis points higher/lower where all other

variables were held constant, Xiyi Company’s net profit for the period

from 1 January 2014 to 30 September 2014, year 2013, year 2012 and year

2011 would decrease/increase by RMB1,432,500.00, RMB3,235,000.00,

RMB5,310,000.00 and RMB7,015,000.00. This is mainly attributable to the

Xiyi Company’s exposure to interest rates on its variable-rate borrowings.

1.2. Credit risk

At 30 September 2014, 31 December 2013, 31 December 2012, and 31 December

2011, Xiyi Company’s maximum exposure to credit risk which will cause a

financial loss to Xiyi Company due to failure to discharge an obligation by the

counterparties issued by Xiyi Company is arising from the carrying amount of

the respective recognized financial assets as stated in the statement of financial

position.

In order to minimize the credit risk, the management of Xiyi Company has

delegated a team responsible for determination of credit limits, credit approvals and

other monitoring procedures except highway toll business to ensure that follow-

up action is taken to recover overdue debts. In addition, Xiyi Company reviews the

recoverable amount of each individual other debts at the end of the reporting period

to ensure that adequate impairment losses are made for irrecoverable amount. In

this regard, the directors of Xiyi Company consider that the compamu’s credit risk

is significantly reduced.

Xiyi Company’s floating capital is kept in bank with high credit ratings, so credit

risk of floating capital is low.

Xiyi Company does not have financial assets that are overdue but not depreciate.

At the end of each reporting period, for those account receivables of third party

with impairment individually, Xiyi Company determines provision for bad debts

according to Xiyi Company’s credit policy, current situation.

Xiyi Company’s operating income is mainly from toll road income, and ancillary

services income. Xiyi Company’s risk exposure spread over a number of clients, so

Xiyi Company does not exist significant credit concentration risk.

— 359 —


1.3. Liquidity risk

In the management of the liquidity risk, Xiyi Company monitors and maintains

a level of cash and cash equivalents deemed adequate by the management to

finance Xiyi Company’s operation and mitigate the effects of fluctuations in cash

flows. The management monitors the utilization of bank borrowings and ensures

compliance with loan covenants. Xiyi Company takes toll road income, bank loans

and loans from related parties as important souce of working capital.

As at 30 September 2014, the net current liabilities of Xiyi Company accounted

RMB644,920,248.06. The main current liabilities included the entrusted loan

provided by Communications Holdings and its affiliated enterprise through bank

is RMB235,000,000; borrowings from non-bank financial institution provided

by Jiangsu Communications Holdings Group Finance Company Limited is

RMB180,000,000; and short-term bonds and private placement bonds issued

by Communications Holdings in which RMB200,000,000 is allocated to Xiyi

Company.

Guangjing Xicheng plans to acquire Xiyi Company from Communications Holdings

and other shareholders. Communications Holdings’s management has agreed

not to request repayment of outstanding balances owing to it and its affiliated

enterprises, to provide all necessary financial support to Xiyi Company in the

foreseeable future so as to maintain the Xiyi Company’s ability to continue as a

going concern before Communications Holdings sold the equity in Xiyi Company.

Furthermore, management of Guangjing Xicheng promises that Guangjing Xicheng

will fulfill the obligation to repay the debts and maintain the going concern of Xiyi

Company’s original business after the merge. The management of Xiyi Company

considers that the liquidity risk of Xiyi Company is greatly reduced through above

measures.

— 360 —


The following is the maturity analysis for financial liabilities held by Xiyi

Company which is based on undiscounted remaining contractual obligations:

30 September 2014

Unit: RMB

30 September

2014 Within 1 month 1-3 months 3-12 months 1-5 years Over 5 years

Accounts Payable 2,107,101.70 3,192,418.27 332,538.35 — —

Other Payable 1,127,116.28 21,776,520.30 947,300.00 — —

Borrowings — 113,866,410.65 620,013,123.80 842,373,348.62 598,330,555.56

Total 3,234,217.98 138,835,349.22 621,292,962.15 842,373,348.62 598,330,555.56

31 December 2013

Unit: RMB

31 December


Accounts Payable 6,670,945.77 68,311.55 4,187,230.80 — —

Other Payable 1,524,962.37 2,432,365.24 876,800.00 — —

Borrowings 80,000,000.00 125,446,174.20 833,039,651.04 560,796,947.22 640,292,388.89

Total 88,195,908.14 127,946,850.99 838,103,681.84 560,796,947.22 640,292,388.89

— 361 —


31 December 2012

Unit: RMB

31 December


Accounts Payable 8,292,060.20 1,779,637.40 34,099,191.30 — —

Other Payable 687,258.29 2,186,997.51 339,000.00 — —

Borrowings — 389,603,908.34 559,348,790.28 785,300,247.22 563,118,575.00

Total 8,979,318.49 393,570,543.25 593,786,981.58 785,300,247.22 563,118,575.00

31 December 2011

Unit: RMB

31 December


Accounts Payable 2,483,023.86 541,957.52 7,014,516.99 — —

Other Payable 2,266,783.79 719,492.00 332,000.00 — —

Borrowings — 294,979,392.21 719,787,280.83 804,059,886.11 480,357,813.33

Total 4,749,807.65 296,240,841.73 727,133,797.82 804,059,886.11 480,357,813.33

(XII) CAPITAL MANAGEMENT

Xiyi Company manage its capital to ensure Xiyi Company will be able to continue as going

concern while maximizing the return to stakeholders through the optimization of the debt and

equity balance. Xiyi Company’s overall strategy remains unchanged from 2011.

Xiyi Company’s capital structure consists of debt which includes borrowings offset by cash and

bank balances as disclosed in Note VIII 1, 12, 18, 19 and shareholder’s equity (comprising of

share capital, and accumulated losses as disclosed in Note VIII 20, 21).

Xiyi Company does not subject to external mandatory capital management requirements.

— 362 —


Xiyi Company manages and makes adjustment to capital structure according to economy

situation. Xiyi Company makes adjustment to dividends of owner or obtains additional capital

from owner to maintain or adjust the capital structure. Xiyi Company does not make any

adjustment on the objective, policy or process to capital management.

(XIII) FAIR VALUE

The Financial Information consists of equity instruments investment which is not quoted in

active markets. With no public market value, the fair value of the equity instruments investment

could not be reliably measured, therefore Xiyi Company measures them at cost.

Furthermore, the directors consider that the carrying amounts of financial assets and financial

liabilities recorded at amortized cost in the Financial Information approximate their fair values.

(XIV) CONTINGENCY

Xiyi Company has no significant contingencies that need to be disclosed.

(XV) COMMITMENTS

Xiyi Company has no significant commitments that need to be disclosed.

(XVI) SUBSEQUENT EVENTS

No significant events occurred subsequent to 30 September 2014 and up to the date of this

report.

(XVII) OTHER SIGNIFICANT EVENTS

1. Annuity scheme

The employees of Xiyi Company are members of an annuity scheme which operated by

an independent third party. Xiyi Company is required to contribute a specified percentage

of their payroll costs to the annuity scheme to fund the benefits. The only obligation of

Xiyi Company with respect to the annuity scheme is to make the specified contributions.

— 363 —




2013: RMB2,082,573.00; 2012: RMB1,875,138.00; 2011: RMB1,502,586.48) which

represents contributions payable to these schemes by Xiyi Company. All the contributions

had been paid over to the scheme as at the end of each reporting period.

2. Retirement benefits scheme

The employees of Xiyi Company are members of a state-managed retirement pension

scheme operated by the local government. Xiyi Company is required to contribute a

specified percentage of their payroll costs to the retirement pension scheme to fund the

benefits. The only obligation of Xiyi Company with respect to the retirement pension

scheme is to make the specified contributions.



2013: RMB4,506,215.16; 2012: RMB3,979,930.27; 2011: RMB3,747,657.80) which

represents contributions payable to these schemes by Xiyi Company. All the contributions

had been paid over to the scheme as at the end of each reporting period.

3. Net current liabilities/ Total Assets less current liabilities

Unit: RMB

30 September

2014 Year 2013 Year 2012 Year 2011

Current assets 50,922,965.11 29,284,047.03 73,310,524.71 114,442,633.72

Total assets 2,467,209,970.91 2,507,636,643.71 2,611,352,099.56 2,644,296,249.70

Less: current liabilities 695,843,213.17 982,858,654.50 903,571,371.30 918,284,010.90

Net current liabilities -644,920,248.06 -953,574,607.47 -830,260,846.59 -803,841,377.18

Total assets less

current liabilities 1,771,366,757.74 1,524,777,989.21 1,707,780,728.26 1,726,012,238.80

— 364 —


4. Net profit for the year deducted from the following:

Unit: RMB

From 1 January

2014 to 30

September 2014

From 1 January

2013 to 30


(Unaudited)

The basic pension insurance

and annuity payment 5,556,078.35 4,567,769.05 6,588,788.16 5,855,068.27 5,250,244.28

Other employee benefits

(including directors’

emoluments) 31,880,068.63 28,610,498.65 45,340,595.25 40,690,429.50 37,156,102.62

Total employee benefits 37,436,146.98 33,178,267.70 51,929,383.41 46,545,497.77 42,406,346.90

Auditor’s remuneration 140,000.00 140,000.00 140,000.00 140,000.00 135,000.00

Depreciation and amortization

(Included in operating costs

and administrative expenses) 63,739,673.07 55,229,329.25 76,695,303.39 58,584,076.73 61,159,377.39

Losses (gain) on disposal

of non-current assets 35,255.81 — 70,639.07 196,119.50 20,988.70

B. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by Xiyi Company subsequent to 30

September 2014 and up to the date of this report.

Yours faithfully,


Shanghai, China

— 365 —

APPENDIX IIIA MANAGEMENT DISCUSSION AND ANALYSIS OF NINGCHANG ZHENLI

JIANGSU NINGCHANG ZHENLI EXPRESSWAY COMPANY LIMITED

Ningchang Zhenli is principally engaged in the construction, operation and management of Ningchang

Expressway and Zhenli Expressway and the development of other relevant ancillary services. The

main revenue of the business of Ningchang Zhenli is its toll income.

Ningchang Zhenli is a limited liability company established in the Jiangsu Province of PRC. Its major

assets are the concession rights of Ningchang Expressway and Zhenli Expressway.

Ningchang Zhenli was established on 10 June 2004. It is a limited liability company established in

accordance with PRC laws. Its major businesses are the operation, maintenance and management of

Ningchang Expressway and Zhenli Expressway.

The following paragraphs set out the management discussion and analysis of the businesses and

business performances of Ningchang Zhenli for the financial years ended 31 December 2011, 31

December 2012 and 31 December 2013, and the nine months ended 30 September 2014.

1. THE FINANCIAL YEAR ENDED 31 DECEMBER 2011

(1) Overview of business and finance

For the year ended 31 December 2011, the income of Ningchang Zhenli amounted to

RMB435,721,407.48, which primarily included the toll income from expressways and

the ancillary expressway services (which constituted 100% of the income of Ningchang

Zhenli).

The gross profit of Ningchang Zhenli amounted to RMB144,472,128.24 and the gross

profit margin was 33.16%.

Apart from the income derived from business operations of Ningchang Zhenli, Ningchang

Zhenli also recorded other income of RMB6,789,262.55, which mainly consisted of rental

income amounting to RMB5,136,100.00.

The administrative and other operational expenses of Ningchang Zhenli amounted to

RMB477,896,547.02, among which interest expenses amounted to RMB445,576,459.91,

depreciation and amortisation amounted to RMB1,867,779.03 and staff costs (including

salary, allowance and retirement benefit costs) amounted to RMB10,155,712.84. The

profit of Ningchang Zhenli was RMB-333,630,491.96. The net profit margin was

approximately -75.39%.

— 366 —


(2) Capital structure, liquidity and financial resources

As at 31 December 2011, Ningchang Zhenli had taken out pledged loan of

RMB1,520,000,000, guaranteed loan of RMB4,252,500,000 and credit facility of

RMB1,335,000,000.00 for working capital. As at 31 December 2011, the pledged loan

was secured by the pledge of the concession right of Ningchang Expressway; the secured

loan was secured by the guarantee provided by Communications Holdings.

As at 31 December 2011, the cash and bank balance of Ningchang Zhenli denominated

in RMB was RMB21,114,461.89, its net current liabities were RMB1,797,607,384.71,

which mainly consisted of the loan provided by banks and related parties. In addition,

certain related parties owed Ningchang Zhenli an amount of RMB56,913,415.29, being

receivables from the related parties Expressway Petroleum Company, Communications

Holdings and Runyang Bridge, and other companies within the network, and which were

unsecured, interest-free and repayable on demand. After off-setting the sum payable

and receivable from the related parties, the net sum payable by Ningchang Zhenli

to the related parties was RMB930,179,682.52. After deducting the net sum payable

to the related parties, the net current liabilities of Ningchang Zhenli was reduced to

RMB867,427,702.19.

As at 31 December 2011, the long-term liabilities of Ningchang Zhenli was

RMB5,374,125,670.49, which mainly consisted of bank loans from China Development

Bank, CITIC Bank, China Merchants Bank, China Construction Bank and Bank of China

and loans from related parties. After deducting the net sum payable to the related parties,

the net long-term liabilities of Ningchang Zhenli remained the same.

As at 31 December 2011, the current ratio (being the percentage of current assets to

current liabilities) and the debt ratio (being the percentage of total debts to total assets) of

Ningchang Zhenli were approximately 4.57% and approximately 87.04%, respectively.

(3) Employment and salary policy

As at 31 December 2011, the total number of employees of Ningchang Zhenli was 1,016.

For the year ended 31 December 2011, the total employment costs of Ningchang Zhenli

(including salary, allowance and retirement benefit costs) were RMB81,209,630. The

salary package provided by Ningchang Zhenli to its employees included contributions

under defined contribution plans. The employees of the operational subsidiary companies

of Ningchang Zhenli in the PRC must enrol in the employee retirement plans operated by

the relevant authorities of the local governments of PRC, and such operational subsidiary

companies shall make contribution for its qualified employees calculated at a certain

percentage of the salary and wages of the qualified employees.

— 367 —


Ningchang Zhenli did not pay any remuneration to its directors or employees for services

provided to Ningchang Zhenli, and it did not pay any remuneration to such persons as

inducement for their joining of Ningchang Zhenli or as bonus for joining Ningchang

Zhenli or as compensation for their resignation. During the year ended 31 December

2011, none of the director had waived or agreed to waive any remuneration arrangement.

(4) Substantial investments held and future plans in respect of substantial investments

or capital assets

As at 31 December 2011, the major assets of Ningchang Zhenli included the concession

rights of Ningchang Zhenli, which had a book value of RMB7,489,747,111.40, and fixed

assets consisted of toll road structures, safety equipment, communication and surveillance

equipment, toll facilities, machinery, electronic equipment, transportation facilities,

furniture and others, which had a book value of RMB704,419,245.34.

In addition, Ningchang Zhenli had an under-construction project for which capital had

already been set aside. Its book value was RMB50,000,000.00, and consisted mainly of a

Gehu interchange project.

As of 31 December 2011, Ningchang Zhenli does not have any RMB capital commitment.

As at 31 December 2011, Ningchang Zhenli did not make any RMB commitment for

minimum lease payments in respect of its lease of property. The relevant lease excluded

contingent rent.

During the year ended 31 December 2011, save as disclosed above, Ningchang Zhenli

had not made any substantial investment. As at 31 December 2011, there were no specific

plans which involve substantial investments or acquisition of substantial assets.

(5) Acquisition or disposal of subsidiaries

During the year ended 31 December 2011, Ningchang Zhenli did not make any material

acquisition or disposal of any subsidiaries or associated companies.

(6) Pledge of assets

As at 31 December 2011, the net book value of the pledged concession rights of

Ningchang Expressway in PRC was RMB4,653,687,371.99.

— 368 —


(7) Contingent liabilities

As at 31 December 2011, Ningchang Zhenli did not have any contingent liabilities.

(8) Risk management and hedge policies

Foreign exchange risks

The business activities, assets and liabilities of Ningchang Zhenli were mainly

denominated in RMB, hence the foreign exchange risks faced by Ningchang Zhenli was

not significant.

Interest rate risks

The major interest rates faced by Ningchang Zhenli mainly involved floating rate

bank borrowings. Ningchang Zhenli obtained the best lending rate for its loans. As

at 31 December 2011, Ningchang Zhenli did not have in place any interest rate swap

arrangements.

Credit risks

As at 31 December 2011, the receivables of Ningchang Zhenli from its related party

amounted to RMB10,894,438.78, and the prepayment and other receivables amounted

to RMB50,556,660.64. In order to minimise the credit risks of Ningchang Zhenli, the

management of Ningchang Zhenli had designated a team to determine the credit limit,

the approval procedure of loans and other supervisory procedures, in order to carry

out appropriate follow up actions. Moreover, Ningchang Zhenli has reviewed all sums

of receivables in every item of receivables at each reporting date to ensure there is

adequate impairment loss made. As at 31 December 2011, Ningchang Zhenli has make no

impairment for prepayments and other receivables.

In respect of managing credit risks on bank deposits, most of the balance of Ningchang

Zhenli had been deposited in banks in PRC with good credit ratings. Therefore,

Ningchang Zhenli had limited the risks it faces against various financial institutions.

— 369 —


Liquidity risks

During the year ended 31 December 2011, Ningchang Zhenli had mainly obtained funds

from bank loans and related parties to provide sufficient funds as its working capital. The

ultimate holding company of Ningchang Zhenli had agreed to provide sufficient funds for

Ningchang Zhenli Group in order to pay for any loan amount that falls due.

During the year ended 31 December 2011, apart from the above, Ningchang Zhenli did

not have any formal hedging policy, and did not use any financial instruments, trade or

arrangement for hedging purposes.



For the year ended 31 December 2012, the income of Ningchang Zhenli was

RMB413,119,751.49, representing a decrease of approximately 5.19% compared with

the income of Ningchang Zhenli of RMB435,721,407.48 during the same period in the

previous year . The relevant income primarily included the toll income from expressways

and the ancillary expressway services (which constituted approximately 100% of the

income of Ningchang Zhenli).

The gross profit of Ningchang Zhenli was RMB57,524,618.07, representing a decrease

of approximately 60.18% compared with the net profit of the same period the previous

year. The major reason was the decrease of income of Ningchang Zhenli and the increase

in operational expenses of Ningchang Zhenli during the year ended 31 December 2012.

The gross profit margin of Ningchan Zhenli was approximately 13.92%; a decrease of

approximately 19.24 percentage points compared with the gross margin of the same

period in the previous year.



income amounting to RMB7,109,900.00. The other income of Ningchang Zhenli during

the financial year ended 31 December 2012 increased by approximately 44.02% compared

with that of the same period in the previous year. The major reason was that the rental

income in 2012 included the leasing of supermarkets.

— 370 —



RMB527,779,860.77 (representing an increase of approximately 10.44% compared with

that of the same period in the previous year), among which interest expenses amounted

to RMB489,672,420.37 (representing an increase of approximately 9.90% compared with

that of the same period in the previous year), depreciation and amortisation amounted to

RMB1,887,510.89 (representing an increase of approximately 1.06% compared with that

at the same period in the previous year) and staff costs (including salary, allowance and

retirement benefit costs) amounted to RMB11,466,271.16 (representing an increase of

approximately 12.90% compared with that of the same period in the previous year, mainly

due to the increased factors such as the annual social security fund and increased wages).

The profit of Ningchang Zhenli was RMB-466,631,150.95. The net profit margin was

-110.34%, representing a decrease of approximately 34.95 percentage points compared

with that of the same period in the previous year.



RMB2,329,000,000 (the pledged loan amounted to RMB1,520,000,000 as at 31 December

2011), guaranteed loan at RMB3,105,000,000.00 (the guaranteed loan amounted to

RMB4,252,500,000 as at 31 December 2011) and credit facility at RMB1,215,000,000.00

(the credit facility amounted to RMB1,335,000,000.00 as at 31 December 2011) for

working capital. As at 31 December 2012, the pledged loan was secured by the pledge of

the concession rights of Ningchang Expressway and Zhenli Expressway; the secured loan

was secured by the guarantee provided by Communications Holdings.


in RMB was RMB105,782,304.01 (representing an increase of approximately

400.99% compared with that as at 31 December 2011), its net current liabilities was

RMB2,040,662,113.07 (representing an increase of approximately 13.52% compared

with that as at 31 December 2011), which mainly consisted of from the loan provided by

banks and related parties. In addition, certain related parties owed Ningchang Zhenli an

amount of RMB8,996,983.51 (representing a decrease of approximately 84.19% compared

with that as at 31 December 2011), being receivables from the related parties Expressway

Petroleum Company, Runyang Bridge and other companies within the expressway

network, and which was unsecured, interest-free and repayable on demand. After off-

setting the sum payable and receivable from the related parties, the net sum payable by

Ningchang Zhenli to the related parties was RMB1,112,309,659.80. After deducting the

net sum payable to the related parties, the net current liabilities of Ningchang Zhenli was

RMB928,352,453.27 (the current liabilities was RMB867,427,702.19 as at 31 December

2011).

— 371 —



RMB5,092,996,479.38 (representing a decrease of approximately 5.23% compared with

that as at 31 December 2011), which mainly consisted of the abovementioned bank loans

from China Development Bank, CITIC Bank, China Merchants Bank, China Construction

Bank and Bank of China and loans from related parties. After deducting the net sum

payable to the related parties, the net long-term liabilities of Ningchang Zhenli was

RMB4,642,996,479.38 (the net long-term liabilities was RMB5,374,125,670.49 as at 31

December 2011).



Ningchang Zhenli were approximately 5.59% (representing an increase of approximately

1.02 percentage points compared with that as at 31 December 2011 and approximately

88.95% (representing an increase of approximately 1.91 percentage points compared with

that as at 31 December 2011), respectively.


As at 31 December 2012, the total number of employees of Ningchang Zhenli was 1,018

(an increase of approximately 0.20% compared with that as at 31 December 2011). For

the year ended 31 December 2012, the total employment costs of Ningchang Zhenli

(including salary, allowance and retirement benefit costs) were RMB92,718,158.08 (an

increase of approximately 14.17% compared with that of the year ended 31 December

2011). The salary package provided by Ningchang Zhenli to its employees included

contributions under defined contribution plans. The employees of the operational

subsidiary companies of Ningchang Zhenli in PRC must enrol in the employee retirement

plans operated by the relevant authorities of the local governments of PRC, and that such

operational subsidiary companies shall make contribution for its qualified employees

calculated at a certain percentage of the salary and wages of the qualified employees.

Ningchang Zhenli did not pay any remuneration to its Directors or employees of

Ningchang Zhenli for services provided to Ningchang Zhenli, and it did not pay any

remuneration to such persons as inducement for their joining of Ningchang Zhenli or as

bonus for joining Ningchang Zhenli or as compensation for their resignation. During the

year ended 31 December 2012, none of the directors had waived or agreed to waive any

remuneration arrangement.

— 372 —



or capital assets


rights of Ningchang Zhenli, which had a book value of RMB7,402,651,137.76

(representing a slight decrease of approximately 1.16% compared with that as at 31

December 2011), and fixed assets consisted of toll road structures, safety equipment,

communication and surveillance equipment, toll facilities, machinery, electronic

equipment, transportation facilities, furniture and others, which had a book value of

RMB623,606,065.28 (representing a decrease of approximately 11.47% compared with

that as at 31 December 2011).


already been set aside. Its book value was RMB373,540.00, and consisted mainly of a

new office building.

As of 31 December 2012, Ningchang Zhenli does not have any RMB capital commitment.

In addition, as at 31 December 2012, Ningchang Zhenli did not make any commitment for

minimum lease payment in respect of its lease of property. The relevant lease excluded

contingent rent.









Ningchang Zhenli Expressways in PRC was RMB7,402,651,137.76.



— 373 —





denominated in RMB, and hence the foreign exchange risks faced by Ningchang Zhenli

were not significant.

Interest rate risks

The major risks of interest rates faced by Ningchang Zhenli mainly involved floating

rate bank borrowings. Ningchang Zhenli obtained the best interest rate for its loans. As


arrangements.

Credit risks

As at 31 December 2012, the receivables of Ningchang Zhenli from its related

party amounted to RMB8,923,239.51 (the sum of the receivables amounted to

RMB10,894,438.78 as at 31 December 2011), and prepayments and other receivables

amounted to RMB2,695,218.66 (prepayments and other receivables amounted to

RMB50,556,660.64 as at 31 December 2011). In order to minimise the credit risks

of Ningchang Zhenli, the management of Ningchang Zhenli had designated a team

to determine the credit limit, the approval procedure of loans and other supervisory

procedures, in order to carry out appropriate follow up actions. Moreover, Ningchang

Zhenli has reviewed all sums of receivables in every item of receivables at each reporting

date to ensure there is adequate impairment loss for the irrecoverable loans. As at 31

December 2012, Ningchang Zhenli has made no impairment for prepayments and other

receivables.




— 374 —


Liquidity risks


from bank loans and related parties, to provide sufficient funds as its working capital. The

ultimate holding company of Ningchang Zhenli has agreed to provide sufficient funds for

Ningchang Zhenli Group in order to pay any loan amount that falls due.






For the year ended 31 December 2013, the income of Ningchang Zhenli was

RMB447,443,874.22, representing an increase of approximately 8.31% compared with

the income of Ningchang Zhenli of RMB413,119,751.49 during the same period in the

previous year. This is mainly due to the increase in traffic flow in 2013. The relevant

income primarily included the toll income from expressways and the ancillary expressway

services (which constituted approximately 100% of the income of Ningchang Zhenli).

The gross profit of Ningchang Zhenli was RMB45,913,914.97, representing a decrease


year. The major reason was the increase in operational expenses of Ningchang Zhenli

during the year ended 31 December 2013. The gross profit margin of Ningchan Zhenli

was approximately 10.26%; a decrease of 3.66 percentage points compared with the gross

margin of the same period in the previous year.




the financial year ended 31 December 2013 increased by 11.07% compared with that

of the same period in the previous year. The major reason was that the relevant rental

income of advertising board in 2013 remained unpaid.

— 375 —




that of the same period in the previous year), which mainly included interest expenses

of RMB468,767,840,30 (representing a decrease of approximately 4.27% compared with

that of the same period in the previous year), depreciation and amortisation amounted

to RMB1,704,922.28 (representing a decrease of approximately 9.67% compared with

that at the same period in the previous year) and staff costs (including salary, allowance

and retirement benefit costs) amounted to RMB12,286,905.54 (representing an increase

of approximately 7.16% compared with that of the same period in the previous year).

The profit of Ningchang Zhenli was RMB-449,995,429.21. The net profit margin was

approximately -98.65%, representing an increase of approximately 11.69 percentage

points compared with that of the same period in the previous year.





RMB3,105,000,000.00 as at 31 December 2012) and credit facility at

RMB1,510,000,000.00 (the credit facility amounted to RMB1,215,000,000.00 as at 31

December 2012) for providing working capital. As at 31 December 2013, the pledged loan

was secured by the pledge of the concession rights of Ningchang Expressway and Zhenli

Expressway; the secured loan was secured by the guarantee provided by Communications

Holdings.


in RMB was RMB90,319,384.10 (representing a decrease of approximately


RMB2,255,945,693.60 (representing an increase of approximately 10.55% compared

with that as at 31 December 2012), which mainly consisted of from the loan provided by

banks and related parties. In addition, certain related parties owed Ningchang Zhenli an

amount of RMB8,205,943.61 (representing a decrease of approximately 8.79% compared


Petroleum Company, Runyang Bridge and other companies within the expressway


setting the sum payable and receivable from the related parties, the net sum payable by

Ningchang Zhenli to the related parties was RMB1,459,860,724.82. After deducting the

net sum payable to the related parties, the net current liabilities of Ningchang Zhenli was

reduced to RMB796,084,968.78 (the current liabilities was RMB928,352,453.27 as at 31

December 2012).

— 376 —









December 2012).



Ningchang Zhenli were approximately 4.37% (representing a decrease of approximately



that as at 31 December 2012) respectively.


As at 31 December 2013, the total number of employees of Ningchang Zhenli was 1,019


the year ended 31 December 2013, the total employment costs of Ningchang Zhenli

(including salary, allowance and retirement benefit costs) were RMB98,217,378.30 (an

increase of approximately 5.93% compared with that for the year ended 31 December

2012). The salary package provided by Ningchang Zhenli to its employees included

contributions under defined contribution plans. The employees of the operational









year ended 31 December 2013, none of the directors had waived or agreed to waive any

remuneration arrangement.

— 377 —



or capital assets








that as at 31 December 2012).


already been set aside. Its book value was RMB5,254,742.82, and consisted mainly of the

renovation of a residential hall.

As of 31 December 2013, Ningchang Zhenli does not have any capital commitment.

In addition, as at 31 December 2013, Ningchang Zhenli did not make any commitment for


contingent rent.









Ningchang Zhenli Expressways in PRC was RMB7,218,142,298.89.



— 378 —







Interest rate risks


rate bank borrowings. Ningchang Zhenli obtained the best interest rate for its loans. As


arrangements.

Credit risks

As at 31 December 2013, the receivables of Ningchang Zhenli from its related

parties amounted to RMB8,132,250.61 (the sum of the receivables amounted to

RMB8,923,239.51 as at 31 December 2012), and prepayment and other receivables

amounted to RMB2,142,302.26 (prepayment and other receivables amounted to






date to ensure there is adequate impairment loss for the irrecoverable loans. As at

31 December 2013, RMB6,726.20 in respect of pre-paid loans and other receivable

impairment loss had been recorded.




Liquidity risks



ultimate holding company of Ningchang Zhenli has agreed to provide sufficient funds for

Ningchang Zhenli Group in order to pay any loan amount that falls due.




— 379 —


4. THE NINE MONTHS ENDED 30 SEPTEMBER 2014


For the nine months ended 30 September 2014, the income of Ningchang Zhenli was

RMB 482,999,013.34, representing an increase of approximately 48.41% compared

with the income of Ningchang Zhenli of RMB325,458,238.90 during the same period

in the previous year. This is mainly due to the toll income from the opening of Lima

Expressway and the increase in income from catering in 2013. The relevant income

primarily included the toll income from expressways and the ancillary expressway

services (which constituted approximately 100% of the income of Ningchang Zhenli).

The gross profit of Ningchang Zhenli was RMB132,952,317.55, representing an increase


year. The major reason was that the increase in income of Ningchang Zhenli was

higher than its operational expenses. The gross profit margin of Ningchan Zhenli was

approximately 27.53%; a decrease of approximately 11.11 percentage points compared

with the gross margin of the same period in the previous year.


Zhenli also recorded other income of RMB8,653,135.00 which mainly consisted of rental


the nine months ended 30 September 2014 increased by approximately 105.29% compared

with that of the same period in the previous year. The major reason was the increase in

income from petrol station and rental income from supermarkets within the period.


RMB381,967.391.75 (representing an increase of approximately 3.93% compared with

that of the same period in the previous year), which mainly included interest expenses of



RMB726,379.50 (representing a decrease of approximately 44.38% compared with that

of the same period in the previous year) and staff costs (including salary costs, allowance



The profit of Ningchang Zhenli was RMB–240,623,632.29. The net profit margin was

approximately –48.94%, representing an increase of approximately 49.71 percentage

points compared with that of the same period in the previous year.

— 380 —



As at 30 September 2014, Ningchang Zhenli had taken out pledged loan of



RMB2,436,600,000 as at 31 December 2013) and credit facility at RMB1,565,000,000.00

(the credit facility amounted to RMB1,510,000,000 as at 31 December 2013) for

providing working capital. As at 30 September 2014, the pledged loan was secured by

the pledge of the concession rights of Ningchang Expressway and Zhenli Expressway; the

secured loan was secured by the guarantee provided by Communications Holdings.

As at 30 September 2014, the cash and bank balance of Ningchang Zhenli denominated




that as at 31 December 2013), which mainly consisted of loan provided by banks and

related parties. In addition, certain related parties owed Ningchang Zhenli an amount of


that as at 31 December 2013), being receivables from the related parties Expressway

Petroleum Company, and the companies within the expressway network, and which was

unsecured, interest-free and repayable on demand. After off-setting the sum payable

and receivable from the related parties, the net sum payable by Ningchang Zhenli to the

related parties was RMB1,307,080,912.18. After deducting the net sum payable to the

related parties, the net current liabilities of Ningchang Zhenli was RMB240,646,569.32

(the current liabilities was RMB796,084,968.78 as at 31 December 2013).

As at 30 September 2014, the long-term liabilities of Ningchang Zhenli was

RMB5,797,970,363.93 (representing an increase of approximately 14.18% compared with






December 2013).

As at 30 September 2014, the current ratio (being the percentage of current assets to


Ningchang Zhenli were approximately 7.63% (representing an increase of approximately



that as at 31 December 2013) respectively.

— 381 —



As at 30 September 2014, the total number of employees of Ningchang Zhenli was 1,020


the 9 months ended 30 September 2014, the total employment costs of Ningchang Zhenli

(including salary, allowance and retirement benefit costs) were RMB61,957,075.66

(an increase of approximately 10.71% compared with that for the same period in the

previous year). The salary package provided by Ningchang Zhenli to its employees

included contributions under defined contribution plans. The employees of the operational









nine months ended 30 September 2014, none of the directors had waived or agreed to

waive any remuneration arrangement.


or capital assets

As at 30 September 2014, the major assets of Ningchang Zhenli included the concession






RMB526,609,250.49 (representing a decrease of approximately 4.30% compared with that

as at 31 December 2013).

In addition, Ningchang Zhenli had no under-construction project for which capital had

already been set aside.

As at 30 September 2014, Ningchang Zhenli does not have any capital commitment.

— 382 —


As at 30 September 2014, Ningchang Zhenli did not make any commitment for minimum

lease payment in respect of its lease of property. The relevant lease excluded contingent

rent.

During the nine months ended 30 September 2014, save as disclosed above, Ningchang

Zhenli had not made any substantial investment. As at 30 September 2014, there were no

specific plans which involve substantial investments or acquisition of substantial assets.


For the nine months ended 30 September 2014, Ningchang Zhenli did not make any

material acquisition or disposal of any subsidiaries or associated companies.

(6) Secured assets

For the nine months ended 30 September 2014, the net book value of the pledged

concession rights of Ningchang Zhenli Expressways in PRC was RMB7,018,361,684.03.


For the nine months ended 30 September 2014, Ningchang Zhenli did not have any

contingent liabilities.






Interest rate risks


rate bank borrowings. Ningchang Zhenli obtained the best interest rate for its loans. For

the nine months ended 30 September 2014, Ningchang Zhenli did not have in place any

interest rate swap arrangements.

— 383 —


Credit risks

For the nine months ended 30 September 2014, the receivables of Ningchang Zhenli

from its associates amounted to RMB17,005,110.69 (the sum of the receivables

amounted to RMB8,132,250.61 as at 31 December 2013), and prepayment and other

receivables amounted to RMB2,118,628.31 (the pre-paid sum and other receivables were






date to ensure there is adequate impairment loss for the irrecoverable loans. For the nine

months ended 30 September 2014, Ningchang has made no impairment for prepayments

and other receivable.



Ningchang Zhenli had limited the risks it faces against various financial institutes.

Liquidity risks

For the nine months ended 30 September 2014, Ningchang Zhenli had mainly obtained

funds from bank loans and related parties, to provide sufficient funds as its working

capital. The ultimate holding company of Ningchang Zhenli has agreed to provide

sufficient funds for Ningchang Zhenli Group in order to pay any loan amount that falls

due.

For the nine months ended 30 September 2014, apart from the above, Ningchang Zhenli

did not have any formal hedging policy, and did not use any financial instruments, trade

or arrangement for hedging purposes.

— 384 —

APPENDIX IIIB MANAGEMENT DISCUSSION AND ANALYSIS OF XIYI COMPANY

JIANGSU XIYI EXPRESSWAY COMPANY LIMITED

Xiyi Company is principally engaged in the operation, maintenance and management of Xiyi

Expressway, Luma Highway and Huantaihu Expressway, and also the Wuxi stretch of Suxi

Expressway. At the moment, the Wuxi stretch of Suxi Expressway was managed by Suzhou Raocheng

Expressway Company Limited on behalf of Xiyi Company. The main revenue of the business of Xiyi

Company is its toll income.

Xiyi Company is a limited liability company established in Jiangsu Province of the PRC. Its major

assets are the concession rights of Xiyi Expressway, Luma Highway, Huantaihu Expressway and the

Wuxi stretch of Suxi Expressway .

Xiyi Company was established on 11 September 2000. It is a limited liability company established

in accordance with PRC laws. Its major businesses are the operation, maintenance and management

of Xiyi Expressway, Luma Highway and Huantaihu Expressway, and also the Wuxi stretch of Suxi

Expressway (at the moment, the Wuxi stretch of Suxi Expressway was managed by Suzhou Raocheng

Expressway Company Limited on behalf of Xiyi Company).

The following paragraphs set out the management discussion and analysis of the businesses and

business performances of Xiyi Company for the financial years ended 31 December 2011, 31

December 2012 and 31 December 2013, and the nine months ended 30 September 2014.



For the year ended 31 December 2011, the income of Xiyi Company was

RMB255,778,688.71, which primarily included the toll income from expressways and the

ancillary expressway services (which constituted approximately 100% of the income of

Xiyi Company).

The gross profit of Xiyi Company was RMB129,216,812.26 and the gross profit margin

was approximately 50.52%.

Apart from the income derived from business operations of Xiyi Company, Xiyi Company

also recorded other income of RMB3,717,247.02, which mainly consisted of rental

income amounting to RMB3,696,836.00.

— 385 —


The administrative and other operational expenses of Xiyi Company amounted to

RMB138,882,809.56, among which interest expenses amounted to RMB119,258,474.67,

depreciation and amortisation amounted to RMB994,322.99 and staff costs (including

salary costs, allowance and retirement benefit costs) amounted to RMB6,809,260.16. The

profit of Xiyi Company was RMB-6,702,955.48. The net profit margin was approximately

–2.58%.


As at 31 December 2011, Xiyi Company had taken out pledged loan of

RMB535,000,000.00, guaranteed loan of RMB738,000,000.00 and credit facility of

RMB640,000,000.00 for providing working capital. As at 31 December 2011, the pledged

loan was secured by the pledge of the concession rights of Xiyi Expressway. The secured


As at 31 December 2011, the cash and bank balance of Xiyi Company denominated in

RMB was RMB10,839,693.69, its net current liabilities was RMB803,841,377.18, which

mainly consisted of the loan provided by banks and related parties. In addition, certain

related parties owed Xiyi Company an amount of RMB90,482,298.51, being receivables

from the related parties Expressway Petroleum Company, Communications Holdings

and companies within the expressway network, and which was unsecured, interest-

free and repayable on demand. After off-setting the sum payable and receivable from

the related parties, the net sum payable by Xiyi Company from the related parties was

RMB372,000,725.35. After deducting the net sum payable to the related parties, the net

current liabilities of Xiyi Company was RMB431,840,651.83.

As at 31 December 2011, the long-term liabilities of Xiyi Company was

RMB1,014,000,000, which mainly consisted of the abovementioned bank loans from

Wuxi branch office of Industrial and Commercial Bank of China, Jiangsu Province

Branch of Industrial and Commercial Bank of China, Chengxi Sub-branch of Nanjing

Branch of Shenzhen Development Bank and Wuxi branch office of Bank of China and

loans from related parties. After deducting the net sum payable to the related parties, the

long-term liabilities of Xiyi Company remained the same.



Xiyi Company were approximately 12.46% and approximately 73.07%, respectively.

— 386 —



As at 31 December 2011, the total number of employees of Xiyi Company was 480. For

the year ended 31 December 2011, the total employment costs of Xiyi Company (including

salary, allowance and retirement benefit costs) were RMB42,406,346.90. The salary

package provided by Xiyi Company to its employees included contributions under defined

Contribution plans. The employees of the operational subsidiary companies of Xiyi

Company in PRC must enrol in the employee retirement plans operated by the relevant

authorities of the local governments of PRC, and such operational subsidiary companies

shall make contribution for its qualified employees calculated at a certain percentage of

the salary and wages of the qualified employees.

Xiyi Company did not pay any remuneration to its directors or employees for services

provided to Xiyi Company, and it did not pay any remuneration to such persons as

inducement for their joining of Xiyi Company or as bonus for joining Xiyi Company or

as compensation for their resignation. During the year ended 31 December 2011, none of

the director had waived or agreed to waive any remuneration arrangement.


or capital assets

As at 31 December 2011, the major assets of Xiyi Company included the concession

rights of Xiyi Expressway, which had a book value of MB 2,439,726,305.28, and fixed

assets consisted of toll road structures, safety equipment, communication and surveillance

equipment, toll and ancilliary facilities, machinery, electronic equipment, transportation

facilities, furniture and others, which had a book value of RMB80,757,090.70.

In addition, Xiyi Company had an under-construction project for which capital had

already been set aside. Its book value was RMB1,220,220,000, and consisted mainly of

ETC construction project, expansion construction project of station area and service area.

As of 31 December 2011, Xiyi Company does not have any capital commitment.

As at 31 December 2011, Xiyi Company did not make any commitment for minimum

lease payments in respect of its lease of property. The relevant lease excluded contingent

rent.

During the year ended 31 December 2011, save as disclosed above, Xiyi Company had

not made any substantial investment. As at 31 December 2011, there were no specific


— 387 —



During the year ended 31 December 2011, Xiyi Company did not make any material



As at 31 December 2011, the net book value of the pledged concession rights of Xiyi

Expressway in PRC by Xiyi Company was RMB1,451,533,943.53.


As at 31 December 2011, Xiyi Company did not have any contingent liabilities.



The business activities, assets and liabilities of Xiyi Company were mainly denominated

in RMB, hence the foreign exchange risks faced by Xiyi Company was not significant.

Interest rate risks

The major risks of interest rates faced by Xiyi Company mainly involved floating rate

bank borrowings. Xiyi Company obtained the best interest rate for its loans. As at 31

December 2011, Xiyi Company did not have in place any interest rate swap arrangements.

Credit risks

As at 31 December 2011, the receivables of Xiyi Company from its associates amounted

to RMB3,103,634, prepayments and other receivables amounted to RMB100,268,899.44.

In order to minimise the credit risks of Xiyi Company, the management of Xiyi

Company had designated a team to determine the credit limit, the approval procedure

of loans and other supervisory procedures, in order to carry out appropriate follow up

actions. Moreover, Xiyi Company has reviewed all sums of receivables in every item

of receivables at each reporting date to ensure there is adequate impairment loss for

the irrecoverable loans. As at 31 December 2011, Xiyi Company has not made any

impairment for prepayments and other receivable.

— 388 —


In respect of managing credit risks on bank deposits, most of the balance of Xiyi

Company had been deposited in banks in PRC with good credit ratings. Therefore, Xiyi

Company had limited the risks it faces against various financial institutions.

Liquidity risks

During the year ended 31 December 2011, Xiyi Company had mainly obtained funds

from bank loans and related parties to provide sufficient funds as its working capital. The

ultimate holding company of Xiyi Company has agreed to provide sufficient funds for

Xiyi Company Group in order to pay for any loan amount that falls due.

During the year ended 31 December 2011, apart from the above, Xiyi Company did






RMB247,434,557.68, representing a decrease of approximately 3.26% compared with the

income of Xiyi Company of RMB255,778,688.71 during the same period in the previous

year . The relevant income primarily included the toll income from expressways and the


Xiyi Company).

The gross profit of Xiyi Company was RMB122,712,201.95, representing a decrease

of 5.03% compared with the same period the previous year. The major reason was the

decrease of income of Xiyi Company during the year ended 31 December 2012. The gross

profit margin of Xiyi Company was approximately 49.59%; a decrease of approximately

0.93 percentage points compared with the same period in the previous year.



income amounting to RMB4,173,683.15. The other income of Xiyi Company during the

financial year ended 31 December 2012 increased by approximately 26.73% compared

with that of the same period in the previous year. The major reason was the increase in

standard of the renting of advertising board and bulk leasing by clients.

— 389 —




that of the same period in the previous year), among which interest expenses amounted


that of the same period in the previous year), depreciation and amortisation amounted


that at the same period in the previous year) and staff costs (including salary, allowance

and retirement benefit costs) amounted to RMB8,106,529.11 (representing an increase of

approximately 19.05% compared with that of the same period in the previous year, mainly

due to normal growth of salary and increased base of expenses). The profit before income

tax of Xiyi Company was RMB-21,218,084.53. After deducting income tax payable

which amounted to RMB13,426.01, the profit of Xiyi Company was RMB–21,231,510.54.

The net profit margin was approximately –8.42%, representing decrease of approximately

5.84 percentage points compared with that of the same period in the previous year.



RMB355,000,000.00 (the pledged loan amounted to RMB535,000,000.00 as at 31

December 2011), guaranteed loan at RMB657,000,000.00 (the guaranteed loan

amounted to RMB738,000,000.00 as at 31 December 2011), and credit facility at

RMB605,000,000.00 (the credit facility amounted to RMB640,000,000.00 as at 31

December 2011) for providing working capital. As at 31 December 2011, the pledged



As at 31 December 2012, the cash and bank balance of Xiyi Company denominated




that as at 31 December 2011), which mainly consisted of the loan provided by the

abovementioned banks and related parties. In addition, certain related parties owed Xiyi

Company an amount of RMB3,091,995.65 (representing a decrease of approximately

96.58% compared with that as at 31 December 2011), being receivables from the related

parties Expressway Petroleum Company and the companies within the expressway


setting the sum payable and receivable from the related parties, the net sum payable

by Xiyi Company to the related parties was RMB562,547,685.22. After deducting the

net sum payable to the related parties, the net current liabilities of Xiyi Company was


2011).

— 390 —


As at 31 December 2012, the long-term liabilities of Xiyi Company was

RMB1,017,000,000 (representing an increase of about approximately 2.96% compared

with that as at 31 December 2011), which mainly consisted of the abovementioned bank

loans from Wuxi branch office of Industrial and Commercial Bank of China, Jiangsu

Province branch of Industrial and Commercial Bank of China, Chengxi Sub-branch of

Nanjing Branch of Shenzhen Development Bank and Wuxi branch office of Bank of

China and loans from related parties. After deducting the net sum payable to the related

parties, the net long-term liabilities of Xiyi Company was RMB767,000,000 (the net long-

term liabilities was RMB1,014,000,000 as at 31 December 2011).



Xiyi Company were approximately 8.11% (representing an increase of approximately 4.35

percentage points compared with that as at 31 December 2011 and 73.55% (representing

an increase of approximately 0.48 percentage point compared with that as at 31 December

2011) respectively.


As at 31 December 2012, the total number of employees of Xiyi Company was 480

(same as that as at 31 December 2011). For the year ended 31 December 2012, the total

employment costs of Xiyi Company (including salary, allowance and retirement benefit

costs) were RMB46,545,497.77 (an increase of approximately 9.76% compared with that

for the same period in the previous year). The salary package provided by Xiyi Company

to its employees included contributions under defined contribution plans. The employees

of the operational subsidiary companies of Xiyi Company must enrol in the employee

retirement plans operated by the relevant authorities of the local governments of PRC,

and that such operational subsidiary companies shall make contribution for its qualified

employees calculated at a certain percentage of the salary and wages of the qualified

employees.

Xiyi Company did not pay any remuneration to its Directors or employees of Xiyi

Company for services provided to Xiyi Company, and it did not pay any remuneration

to such persons as inducement for their joining of Xiyi Company or as bonus for joining

Xiyi Company or as compensation for their resignation. During the year ended 31

December 2012, none of the directors had waived or agreed to waive any remuneration

arrangement.

— 391 —



or capital assets


rights of Xiyi Expressway, which had a book value of RMB2,401,834,810.39 (representing

a slight decrease of approximately 1.55% compared with that as at 31 December 2011),

and fixed assets consisted of toll road structures, safety equipment, communication and

surveillance equipment, toll facilities, machinery, electronic equipment, transportation

facilities, furniture and others, which had a book value of RMB121,904,659.46

(representing a decrease of approximately 50.95% compared with that as at 31 December

2011).


already been set aside. Its book value was RMB6,152,105.00, and consisted mainly of the

investigation and design cost of surveillance system and modification costs of surveillance

system.


As at 31 December 2012, Xiyi Company did not make any commitment for minimum


rent.





During the year ended 31 December 2012, Xiyi Company did not make any material







— 392 —





in RMB, and hence the foreign exchange risks faced by Xiyi Company were not

significant.

Interest rate risks




Credit risks


to RMB3,091,991.65 (the sum of the receivables amounted to RMB3,103,634.00 as at 31

December 2011), and prepayment and other receivables amounted to RMB1,438,247.29

(prepayments and other receivables are RMB100,268,899.44 as at 31 December

2011). In order to minimise the credit risks of Xiyi Company, the management of Xiyi




of receivables at each reporting date to ensure there is adequate impairment loss for

the irrecoverable loans. As at 31 December 2012, Xiyi Company has not made any

impairment for prepayments and other receivables.



Company had limited the risks it faces against various financial institutes.

Liquidity risks



ultimate holding company of Xiyi Company had agree to provide sufficient funds for Xiyi

Company Group in order to pay any loan amount that falls due.




— 393 —





RMB259,938,909.85, representing a increase of 5.05% compared with the income of

Xiyi Company of RMB247,434,557.68 during the same period in the previous year. The

relevant income primarily included the increased toll income from expressways (which

constituted approximately 100% of the income of Xiyi Company).

The gross profit of Xiyi Company was RMB111,409,994.10, representing a decrease


year. The major reason was the increase of operational expenses of Xiyi Company

during the year ended 31 December 2013. The gross profit margin of Xiyi Company was

approximately 42.86%; a decrease of approximately 6.73 percentage points compared

with the gross margin of the same period in the previous year.



income amounting to RMB2,758,462.36. The other income of Xiyi Company during the

financial year ended 31 December 2013 decreased by approximately 40.47% compared

with that of the same period in the previous year. The major reason was the income from

leasing of advertising board was settled in alternative years, advertising clients had not

reversed contract invoices, and reform of tax excluded in price in changes from business

tax to value-added-tax to tax excluded in price.


RMB141,491,190.98 (representing a decrease of approximately 4.28% compared

with that of the same period in the previous year), which mainly included interest

expenses amounted to RMB120,163,652.20 (representing a decrease of approximately

5.36% compared with that of the same period in the previous year), depreciation and

amortisation amounted to RMB1,544,500.61 (representing an increase of approximately

10.11% compared with that at the same period in the previous year) and staff costs

(including salary, allowance and retirement benefit costs) amounted to RMB8,408,588.99

(representing an increase of 3.73% compared with that of the same period in the previous

year, mainly due to normal growth of salary and increased base of expenses). The

profit before income tax of Xiyi Company was RMB–28,001,594.97. After deducting

income tax payable which amounted to RMB1,144.08, the profit of Xiyi Company was

RMB–28,002,739.05. The net profit margin was approximately –10.66%, representing a

decrease of approximately 2.24 percentage points compared with that of the same period

in the previous year.

— 394 —




RMB250,000,000.00 (the pledged loan amounted to RMB355,000,000.00 as at 31

December 2012), guaranteed loan at RMB397,000,000.00 (the guaranteed loan

amounted to RMB657,000,000.00 as at 31 December 2012), and credit facility at

RMB465,000,000.00 (the credit facility amounted to RMB605,000,000.00 as at 31

December 2012) for providing working capital. As at 31 December 2013, the pledged



As at 31 December 2013, the cash and bank balance of Xiyi Company denominated

in RMB was RMB24,048,313.11 (representing a decrease of approximately


RMB953,574,607.47 (representing an increase of 14.85% compared with that as

at 31 December 2011), which mainly consisted of from the loan provided by the


Company an amount of RMB3,442,275.99 (representing an increase of 11.33% compared


Petroleum Company and the companies within the expressway network, and which was

unsecured, interest-free and repayable on demand. After off-setting the sum payable and

receivable from the related parties, the net sum payable by Xiyi Company to the related

parties was RMB681,317,154.33. After deducting the net sum payable to the related

parties, the net current liabilities of Xiyi Company was RMB272,257,453.14 (the current

liabilities was RMB267,713,161.37 as at 31 December 2012).

As at 31 December 2013, the long-term liabilities of Xiyi Company was RMB862,000,000


2012), which mainly consisted of the abovementioned bank loans from Wuxi branch

office of Industrial and Commercial Bank of China, Jiangsu Province branch of

Industrial and Commercial Bank of China, Chengxi Sub-branch of Nanjing Branch of

Shenzhen Development Bank and Wuxi branch office of Bank of China and loans from

related parties. After deducting the net sum payable to the related parties, the net long-

term liabilities of Xiyi Company was RMB362,000,000 (the long-term liabilities was

RMB767,000,000 as at 31 December 2012).



Xiyi Company were approximately 2.98% (representing a decrease of approximately 5.13

percentage points compared with that as at 31 December 2012 and approximately 73.57%

(which is similar to that as at 31 December 2012) respectively.

— 395 —



As at 31 December 2013, the total number of employees of Xiyi Company was 480 (same

as that as at 31 December 2012). The total employment costs of Xiyi Company (including

salary, allowance and retirement benefit costs) were RMB51,929,383.41 (an increase of

approximately 11.57% compared with that for the same period in the previous year). The

salary package provided by Xiyi Company to its employees included contributions. The

employees of the operational subsidiary companies of Xiyi Company must enrol in the

employee retirement plans operated by the relevant authorities of the local governments

of PRC, and that such operational subsidiary companies shall make contribution for its

qualified employees calculated at a certain percentage of the salary and wages of the

qualified employees.




Xiyi Company or as compensation for their resignation. During the year ended 31

December 2013, none of the directors had waived or agreed to waive any remuneration

arrangement.


or capital assets







(representing a decrease of 3.90% compared with that as at 31 December 2012).

In addition, Xiyi Company had no under-construction project.


In addition, as at 31 December 2013, Xiyi Company did not make any commitment for


contingent rent.

— 396 —






During the year ended 31 December 2013, Xiyi Company has not made any material


(6) Secured assets









significant.

Interest rate risks




— 397 —


Credit risks


to RMB3,442,275.99 (the sum of the receivables amounted to RMB3,091,991.65 as at 31

December 2012), and prepayments and other receivables amounted to RMB1,447,660.45

(prepayments and other receivables are RMB1,438,247.29 as at 31 December 2012).

In order to minimise the credit risks of Xiyi Company, the management of Xiyi




of receivables at each reporting date to ensure there is adequate impairment loss for the

irrecoverable loans. As at 31 December 2013, Xiyi Company has not made impairments

for prepayments and other receivables.




Liquidity risks



ultimate holding company of Xiyi Company had agree to provide sufficient funds for Xiyi

Company Group in order to pay any loan amount that falls due.




4. THE NINE MONTHS ENDED 30 SEPTEMBER 2014


For the nine months ended 30 September 2014, the income of Xiyi Company was

RMB205,989,061.25, representing an increase of approximately 6.49% compared with the

income of Xiyi Company of RMB193,442,819.17 during the same period in the previous

year. This is mainly due to normal growth in traffic flow in the year ended 31 December

2013. The relevant income primarily included the toll income from expressways and the


Xiyi Company).

— 398 —


The gross profit of Xiyi Company was RMB95,228,491.08, representing a decrease of

approximately 14.52% compared with the net profit of the same period the previous year.

The major reason was that the increase in income of Xiyi Company was higher than

its operational expenses. The gross profit margin of Xiyi Company was approximately

46.23%; an increase of approximately 3.37 percentage points compared with the gross

margin of the same period in the previous year.

Apart from the income deriving from business operations of Xiyi Company, Xiyi

Company also recorded other income of RMB1,639,350.90 which mainly consisted of

rental income amounting to RMB1,639,350.90. The other income of Xiyi Company

during the nine months ended 30 September 2014 increased by approximately 33.76%

compared with that of the same period in the previous year.


RMB99,772,751.55 (representing an decrease of approximately 4.43% compared with

that of the same period in the previous year), which mainly included interest expenses

of RMB83,538,287.37 (representing a decrease of approximately 5.94% compared with


RMB1,151,456.96 (representing an increase of approximately 3.98% compared with that

at the same period in the previous year) and staff costs (including salary costs, allowance



The profit of Xiyi Company was RMB-3,411,231.47. The net profit margin was -1.64%,

representing an increase of approximately 30 percentage points compared with that of the

same period in the previous year.


As at 30 September 2014, Xiyi Company had taken out guaranteed loan at

RMB382,000,000.00 (the guaranteed loan amounted to RMB397,000,000 as at 30

September 2013), and credit facility at RMB415,000,000.00 (the credit facility amounted

to RMB465,000,000 as at 30 September 2013) for providing working capital. As

at 30 September 2014, the secured loan was secured by the guarantee provided by

Communications Holdings.

— 399 —


As at 30 September 2014, the cash and bank balance of Xiyi Company denominated




that as at 31 December 2013), which mainly consisted of from the loan provided by the


Company an amount of RMB3,881,925.54 (representing an increase of approximately

12.77% compared with that as at 31 December 2013), being receivables from the related

parties Expressway Petroleum Company and the companies within the expressway


setting the sum payable and receivable from the related parties, the net sum payable

by Xiyi Company to the related parties was RMB640,853,304.59. After deducting the

net sum payable to the related parties, the net current liabilities of Xiyi Company was


2013).

As at 30 September 2014, the long-term liabilities of Xiyi Company was

RMB1,112,000,00 (representing an increase of approximately 29.00% compared with

that as at 31 December 2013), which mainly consisted of bank loans from Wuxi branch

office of Industrial and Commercial Bank of China, Jiangsu Province branch of Industrial

and Commercial Bank of China, Chengxi sub-branch of Nanjing Branch of Shenzhen

Development Bank and Wuxi branch office of Bank of China and loans from related

parties. After deducting the net sum payable to the related parties, the long-term liabilities

of Xiyi Company was RMB362,000,000 (the long-term liabilities was RMB362,00,000 as

at 31 December 2013).

As at 30 September 2014, the current ratio (being the percentage of current assets to


Xiyi Company were approximately 7.32% (representing an increase of approximately 4.34

percentage points compared with that as at 31 December 2013 and approximately 73.27%

(representing a decrease of approximately 0.3 percentage points compared with that as at

31 December 2013) respectively.

— 400 —



As at 30 September 2014, the total number of employees of Xiyi Company was 480 (same

as that as at 31 December 2013). The total employment costs of Xiyi Company (including

salary, allowance and retirement benefit costs) were RMB37,436,143.98 (an increase

of approximately 12.83% compared with that for the same period in the previous year).

The salary package provided by Xiyi Company to its employees included contributions

under defined contribution plans. The employees of the operational subsidiary companies

of Xiyi Company in PRC must enrol in the employee retirement plans operated by the

relevant authorities of the local governments of PRC, and that such operational subsidiary

companies shall make contribution for its qualified employees calculated at a certain

percentage of the salary and wages of the qualified employees.




Xiyi Company or as compensation for their resignation. During the nine months ended 30

September 2013, none of the directors had waived or agreed to waive any remuneration

arrangement.


or capital assets

As at 30 September 2014, the major assets of Xiyi Company included the concession







2013).


already been set aside. Its book value was RMB510,000.00, and consisted mainly of card

issuing machines, construction costs of card issuing machines and construction costs of

automatic card issuing machines vehicles identification project.

As at 30 September 2014, Xiyi Company does not have any capital commitment.

— 401 —


As at 30 September 2014, Xiyi Company did not make any commitment for minimum


rent.

During the nine months ended 30 September 2014, save as disclosed above, Xiyi

Company had not made any substantial investment. As at 30 September 2014, there were

no specific plans which involve substantial investments or acquisition of substantial

assets.


For the nine months ended 30 September 2014, Xiyi Company has not made any material



For the nine months ended 30 September 2014, Xiyi Company did not have any pledged

assets.


For the nine months ended 30 September 2014, Xiyi Company did not have any

contingent liabilities.





significant.

Interest rate risks


bank borrowings. Xiyi Company obtained the best interest rate for its loans. For the nine

months ended 30 September 2014, Xiyi Company did not have in place any interest rate

swap arrangements.

— 402 —


Credit risks

For the nine months ended 30 September 2014, the receivables of Xiyi Company

from its associates amounted to RMB3,881,925.54 (the sum of the receivables

amounted to RMB3,442,275.99 as at 31 December 2013), and prepayments and other

receivables amounted to RMB875,053.28 (the pre-paid sum and other receivables are

RMB1,447,660.45 as at 31 December 2014). In order to minimise the credit risks of Xiyi

Company, the management of Xiyi Company had designated a team to determine the

credit limit, the approval procedure of loans and other supervisory procedures, in order

to carry out appropriate follow up actions. Moreover, Xiyi Company has reviewed all

sums of receivables in every item of receivables at each reporting date to ensure there

is adequate impairment loss for the irrecoverable loans. For the nine months ended 30

September 2014, Xiyi Company has not made any impairments for prepayments and other

receivables.




Liquidity risks

For the nine months ended 30 September 2014, Xiyi Company had mainly obtained funds


ultimate holding company of Xiyi Company has agreed to provide sufficient funds for

Xiyi Company Group in order to pay any loan amount that falls due.

For the nine months ended 30 September 2014, apart from the above, Xiyi Company did



— 403 —

APPENDIX IVA VALUATION REPORT OF NINGCHANG ZHENLI

I. The following is the text of a report prepared for the purpose of incorporation in this circular

received from an independent valuer in connection with their assessment of the valuation of

Ningchang Zhenli.

January 23, 2015

The Directors

Jiangsu Expressway Company Limited6 Xianlin Avenue, Qixia District

Nanjiang, Jiangsu Province

P.R. China

Our Ref.: GS14/0602(A)

Dear Sirs,

VALUATION OF EQUITY INTEREST OF JIANGSU NINGCHANG ZHENLI EXPRESSWAY CO., LTD

Pursuant to the terms, conditions and purpose of an engagement agreement dated September 23,

2014 (the “Engagement Agreement”) between Jiangsu Expressway Company Limited (“Jiangsu Expressway” or the “Company”) and American Appraisal China Limited (“American Appraisal”),

we have performed an analysis of fair market value of the 100% equity interest in the business

enterprise (the “Valuation”) of 江蘇寧常鎮溧高速公路有限公司 (Jiangsu Ningchang Zhenli

Expressway Co., Ltd) (“Ningchang Zhenli Expressway Co.” or the “Project Company”). We

understand that Jiangsu Expressway is contemplating the acquisition of 100% equity interest and all

interest bearing debt of Ningchang Zhenli Expressway Co., (the “Acquisition”) . Our Valuation is

prepared as at September 30, 2014 (“Valuation Date”).

This letter identifies the business appraised, describes the scope of work, states the basis of value,

specifies key inputs and assumptions, explains the valuation methodology utilized, and presents

our conclusion of value. We prepared this Valuation Report in accordance with the International

Valuation Standards which are issued by the International Valuation Standards Council. This valuation

is addressed to Jiangsu Expressway for the intended use as stated below. Supporting documentation

concerning these matters has been retained in our work papers.

— 404 —


We understand that Jiangsu Expressway, with our consent, will disclose this letter in the circular

for their shareholders and to The Stock Exchange of Hong Kong Limited (the “Stock Exchange”)

pursuant to the requirements of the Rules Governing the Listing of Securities on The Stock Exchange

of Hong Kong Limited. No third party shall have the right of reliance on this letter and neither

receipt nor possession of this letter by any third party shall create any express or implied third-party

beneficiary rights.

PURPOSE OF THE VALUATION

Jiangsu Expressway intends to acquire 100% equity interest and interest bearing debt of Ningchang

Zhenli Expressway Co.. Ningchang Zhenli Expressway Co., is principally engaged in operation and

management of Ningchang Expressway and Zhenli Expressway, two important expressways in Jiangsu

Province. A traffic study of Ningchang Expressway, and Zhenli Expressway dated December 10,

2014 (the “Traffic Report”) was undertaken by Jiangsu Weixin Engineering Consultants Ltd (江蘇緯信工程諮詢有限公司) (the “Traffic Consultant”). With approval of Jiangsu Expressway and as

stipulated in the Engagement Agreement, in formulating our opinion on the Valuation, we relied upon

the completeness and accuracy of operational and financial information provided by the Management,

including the Traffic Report.

The intended use of the Valuation is to provide Jiangsu Expressway additional reference on the

basis of the purchase price for the Acquisition. The purchase price was arrived at after negotiations

between the contracting parties (being Jiangsu Expressway and Ningchang Zhenli Expressway Co.’s

existing shareholders). The responsibility for final determination of the agreed acquisition price does

not rest on American Appraisal. Our opinion of fair market value should not be construed to be a

solvency opinion or an investment recommendation. It is inappropriate to use our valuation report for

purpose other than its intended use or by third parties. These third parties should conduct their own

investigation and independent assessment of the prospective financial information and underlying

assumptions.

BASIS OF THE VALUATION

The Valuation was prepared on the basis of fair market value standard under the premise of continued

use. Fair market value is defined as the price that would be received to sell an asset or paid to transfer

a liability in an orderly transaction between market participants at the measurement date.

Our opinion of value was established under the premise of continued use, which reflects the condition

where the buyer and the seller contemplate retention of the business and related assets as part of

current or forecast operations.

— 405 —


Business enterprise is defined for this appraisal as the total invested capital, that is, equivalent to the

combination of all interest-bearing debts, shareholders’ loans and shareholders’ equity. Alternatively,

the business enterprise is equivalent to the combination of all tangible assets (buildings, machinery and

equipment), long-term investment, net operating working capital and intangible assets of a continuing

business. Equity interest is equivalent to business enterprise value less interest-bearing debts.

TRAFFIC REPORT

The Traffic Report on the projected revenue of Ningchang Zhenli Expressway Co. was prepared by

the Traffic Consultant dated December 10, 2014. It provides the projected revenue and expenses of

Ningchang Zhenli Expressway Co. between 2014 and 2032. The Traffic Consultant has been involved

in several national road traffic projects in different provinces in China including projects of listed

companies and was hired by the Management of Jiangsu Expressway as its traffic consultant in this

Valuation. We relied on the revenue and expenses projections provided by the Traffic Consultant as

basis in forming our opinion of value. In considering whether the Traffic Report is an appropriate

basis for this valuation, we performed the following procedures:

• Review of credential and track records of the Traffic Consultant in preparing reports for similar

transactions;

• Discussion with the Traffic Consultant to understand the assumptions, methodologies and

conclusions of the Traffic Report;

• Analysis of the industry, competitive and regulatory environment of related businesses through

review of relevant market and industry reports;

• Analysis of the Project Company’s historical financial performance by the management;

• Discussion with the management regarding the nature and operation and financial conditions of

the Project Company;

• Analysis of financial ratios of companies engaged in the same or similar lines of businesses.

— 406 —


DESCRIPTION OF NINGCHANG ZHENLI EXPRESSWAY CO.

Ningchang Zhenli Expressway Co. was established in 2004. It’s registered capital is RMB3,328.85

million. It is engaged in management and operation of Ningchang Expressway and Zhenli Expressway.

It is a wholly owned subsidary of 江蘇交通控股有限公司 (Jiangsu Communications Holdings

Limited).

Ningchang Expressway links Nanjing with Changzhou, starting from Lishui Transit Hub, intersecting

Yangzhou-Liyang expressway at Xuequdong, passing through Lishui, Jurong, Jintai and Wujin.

Ningchang Expressway has a length of 87.26 kilometers.

Zhenli Expessway links Zhenjiang and Liyang, starting from Dantu Transit Hub, intersecting Nanjing-

Taicang expressway at Jintan, connecting to Ninghang Expressway and Liyang-Guangde expressway.

Zhenli Expessway has a length of 65.66 kilometers.

Ningchang Expressway and Zhenli Expressway were both completed and opened to traffic in

September 2007. According to 關於重新核定部分高速公路收費期限的通知 (the “Announcement”)

issued by Jiangsu Provincial Government in 2012, Ningchang Zhenli Expressway Co. was granted the

operating right of Ningchang Expressway and Zhenli Expressway for a term of 25 years, commencing

from September 2007 and ending in September 2032.

Ningchang Zhenli Expressway Co. holds two long term investments: 江蘇現代路橋有限責任公司(Jiangsu Modern Road&Bridge Co Limited)(3.62% shareholding) and 江蘇高速公路營運管理有限公司(Jiangsu Expressway Operation & Management Co., Ltd.) (7.5% shareholding).

FINANCIAL REVIEW

According to the audited consolidated financial statements of Ningchang Zhenli Expressway Co., the

consolidated net asset value as at September 30, 2014 amounted to approximately RMB210.5 million;

and the consolidated net loss after taxation for the financial year ended September 30, 2014 was

approximately RMB240.6 million. The consolidated cash balance was approximately RMB108 million

as of the Valuation Date. Consolidated total liabilities as of the Valuation Date was approximately

RMB7.47 billion.

— 407 —


ECONOMIC OVERVIEW

A sound appraisal of a business or business interest must consider current and prospective economic

conditions, in both the national economy and the industry or industries with which Project Company

is allied. The major variables reviewed in order to evaluate the overall state of the national economy

include economic growth, inflation rate and exchange rate. As China is the major market for Project

Company, an overview of the economy of China is essential to develop this outlook. The following

economic discussion is extracted from Economic Intelligence Unit (“EIU”) “China: Country outlook”

on September 5, 2014. According to website of EIU, established in 1946, it is the research and

analysis division of The Economist Group, the sister company to The Economist newspers. It has over

60 years of experiences in providing forecasting and advisory services through research and analysis to

financial firms, businesses and government. In preparing data and statistics, EIU uses primary research

techniques and fieldwork. Its methodologies, frameworks and analytical tools are both quantitative

and qualitative. EIU was not commissioned by the Company, its connected persons or any of their

associates.

• Economic Growth: Real GDP growth accelerated to 7.5% year on year in April-June, from

7.4% in the first quarter. This suggests that the government’s “mini-stimulus package”, which

involved a modest loosening of monetary and fiscal policy, has gained traction. EIU forecasts

that the economy will expand by 7.5% in 2014 as a whole. Given that the government’s real

GDP growth target of “about 7.5%” is within reach, EIU expects policy to shift to a neutral

stance in the second half of the year, as the focus of policymakers returns to addressing

structural issues in the economy, for example by reining in credit growth. Nonetheless, weaker

data for July show that the economic outlook remains fragile. If growth slows again, further

stimulus measures could be introduced.

• Inflation: EIU expects annual consumer price inflation to average 3.1% in 2014–18. Over the

period as a whole improved transportlogistics, an expected decline in global oil costs and the

anticipated strengthening of the renminbi will help to rein in price increases. However, rapid

domestic demand growth and weaker expansion in the supply of products (as investment slows)

will generate inflationary pressures. The threat of a bad harvest pushing food prices sharply

higher will remain. Producer prices will be flat on average in 2014–15, as excess industrial

capacity will continue to weigh on prices.

• Exchange Rate: Despite the renminbi’s weakness early this year, EIU believes that the

currency will appreciate against the US dollar in 2014 as a whole. A strong rise in foreign-

exchange reserves in the first half of the year indicated that the currency’s depreciation had

been engineered by the authorities, probably in an effort to deter speculative capital inflows.

However, EIU believes that they remain committed in the long term to scaling back such heavy

intervention, as this is tied to policy goals such as the rebalancing of the economy and the

renminbi’s internationalisation. EIU expects the local currency to continue to strengthen slowly

against the US dollar in 2015–17, before depreciating in 2018 as China’s external position

weakens.

— 408 —


INDUSTRY OVERVIEW

The industry discussion below was extracted from the equity research reports published by

Morningstar, Inc. and United Bank of Switzerland on August 26, 2014 and August 25, 2014,

respectively.

Regional economic expansion is the key driver for the traffic growth. As part of China’s 12th Five-

Year Plan (2011–2015), Jiangsu province targets 10% compound annual GDP growth, well above

the nationwide target of 7.5%, which is expected to support low-to-mid single digit traffic growth.

Furthermore, the trend of industrial activity moving from coastal to inland regions, such as Anhui,

Hubei and Henan provinces, may benefit cargo and truck traffic growth from increased demand from

regional logistics operators. In addition, the continued growth of private car ownership in Jiangsu

province will further boost traffic growth.

Policy risk had been a major concern for the toll road sector previously. However, with Ministry of

Transport’s proposal of a new revised “Toll Road Management Ordinance” which allows concession

extensions, the policy risk is already behind us. Furthermore, toll road operators will benefit from

improving traffic and better revenue/vehicle from truck recovery.

SCOPE OF WORKS AND KEY ASSUMPTIONS

Our investigation included discussions with the Management and the Traffic Consultant with regard

to the history, operations and prospects of Ningchang Zhenli Expressway Co., an overview of certain

financial data, an analysis of the industry and competitive environment, an analysis of comparable

companies, and a review of operating statistics and other relevant documents, whenever available.

We also made reference to or reviewed the following major documents and data:

• financial statements of Ningchang Zhenli Expressway Co. for the financial years ended 31

December 2011, 2012, 2013 and nine months ended 30 September 2014;

• Draft copies of the agreements to acquire the right (the “Concession Right”) to operate the

Ningchang Zhenli Expressway Co.;

— 409 —


• a copy of the Traffic Report with financial projection and the breakdown of major operating

expenses prepared;

• breakdown of historical revenue, cost of revenue, and operating expenses of Ningchang Zhenli

Expressway Co.;

• Summary of key terms of bank borrowing of Ningchang Zhenli Expressway Co.;

• other documents that we considered relevant.

We assumed that the data we obtained in the course of the Valuation, along with the opinions and

representations provided to us by the Management are true and accurate and accepted them without

independent verification except as expressly described herein. We have no reason to suspect that any

material facts have been omitted, nor are we aware of any facts or circumstances, which would render

the information, opinion and representations made to us to be untrue, inaccurate or misleading. In

arriving at our opinion of value, we have considered the following principal factors:

• the stage of development of Ningchang Zhenli Expressway Co.;

• the historical costs and current financial condition of Ningchang Zhenli Expressway Co.;

• the Traffic Report provided by the Traffic Consultant;

• the economic outlook for China and specific competitive environments affecting the toll road

industry;

• the legal and regulatory issues of the toll road industry in general and other specific legal

opinions relevant;

• the risks of Ningchang Zhenli Expressway Co.; and

• the experience of the Management.

— 410 —


Due to the changing environments in which Ningchang Zhenli Expressway Co. is operating, a number

of assumptions have to be made in arriving at our value conclusion. The key assumptions adopted in

the Valuation are:

• no major changes are expected in the political, legal and economic conditions in China;

• industry trend and market conditions for toll road industry in China will continue to develop

according to prevailing market expectations;

• there will be no major changes in the current taxation law and/or taxation rates applicable to

Ningchang Expressway and Zhenli Expressway;

• the operation of Ningchang Zhenli Expressway Co. will not be constrained by the availability of

finance;

• future exchange rates and interest rates movement will not differ materially from prevailing

market expectations; and

• Ningchang Zhenli Expressway Co. will retain competent management, key personnel and

technical staff to support its ongoing operations.

VALUATION METHODOLOGY AND ASSUMPTIONS

In the appraisal of the equity, or the net assets, of a business, regardless of their diversity, location,

or technological complexity, there are three basic approaches to value. The descriptive titles typically

attached to these approaches are cost, income, and market. In normal circumstances, the appraiser

is obliged to consider all three approaches, as any, or perhaps all, may provide reliable measures of

value.

Cost approach established value based on the cost of reproducing or replacing the property less

depreciation from physical deterioration and functional and economic obsolescence, if present and

measurable. This approach might be considered the most consistently reliable indication of value

for assets without a known used market or separately identifiable cash flows attributable to assets

appraised.

Income approach is the conversion of expected periodic benefits of ownership into an indication of

value. It is based on the principle that an informed buyer would pay no more for the property than an

amount equal to the present worth of anticipated future benefits (income) from the same or equivalent

property with similar risk.

— 411 —


Market approach considers prices recently paid for similar assets, with adjustments made to the

indicated market prices to reflect condition and utility of the appraised assets relative to the market

comparable. Assets for which there is an established used market may be appraised by this approach.

To develop our opinion of value, the three generally accepted approaches to value are considered:

cost, market and income. We have not identified any market transactions which are comparable

because each toll road may be unique and may have different considerations on transaction price

which depends on many factors such as location, toll rate, traffic volume, stage of operation and status

of the toll road assets. While useful for certain purposes, the cost approach is generally not considered

applicable to the valuation of a going concern, as it does not capture future earning potential of the

business. Thus both market approach and cost approach were not utilized in the Valuation. Therefore,

we relied upon the income approach, known as the discounted cash flow method, in forming our

opinion of value.

INCOME APPROACH

Under the discounted cash flow method, it explicitly recognizes that the current value of an investment

is premised upon the expected receipt of future economic benefits such as periodic income, cost

savings, or sale proceeds. Indication of value is developed by discounting future net cash flow to the

present value at a rate that reflects both the current return requirements of the market and the risks

inherent in the specific investment.

As Ningchang Zhenli Expressway Co. was set up for such toll road project, its capital structure will

change due to debt repayment or additional borrowing. The Adjusted Present Value (the “APV”)

method was used in order to exclude the distortion resulting from the change in capital structure

over the concession period. In the Valuation, the APV method values an enterprise or project by

discounting projected free cash flows at a rate of return assuming all-equity financing as fundamental

value (the “Fundamental Value”). We then added the Fundamental Value to the present value of tax

shield effect and less total outstanding debt, to arrive at fair market value of the equity interest.

— 412 —


DEFINITION OF FREE CASH FLOW

The term free cash flow (“FCF”) can be represented by the following equation:

FCF = NI + DEPR + INT – CAPEX – NWC

Where:

FCF=projected free cash flow available to equity and debt holders

NI=net income after tax

DEPR=depreciation and amortization expenses

INT=interest expense after tax

CAPEX=capital expenditures

NWC=changes in net working capital (current assets net of current liabilities)

A major requirement of the DCF method is an earnings forecast, in particular a cash flow projection.

The yearly FCF for the projection period of 2014 to 2032 was derived based on the above formula.

The operating right of Ningchang Zhenli Expressway will expire in September 2032, hence the

enterprise was assumed to transfer the expressway back to the government upon the termination of the

concession period.

— 413 —


PROJECTION ASSUMPTION

The major projection assumptions were listed as below:

Revenue

Revenue is mainly driven by imposing toll charges on vehicles using the road for transportation

purposes. In the Traffic Report, vehicles are charged according to their type, weight and the distance

of road the vehicles have taken for transport. Historical traffic data, economic researches, transport

indexes, etc., were considered by the Traffic Consultant in their projections. Standard toll charge of

each vehicle type is assumed unchanged over the period of the Concession Right. Thus, the revenue

growth would be driven by the increase in traffic and/or change in traffic mix by vehicle type.

The traffic volume and toll revenue (base on 2014 price level) estimated by traffic consultant are

summarized in the table below:

Year Traffic volume Growth rate Toll revenue

(veh/day) (RMB’000/year)

2014 28,520 — 654,657

2015 33,249 16.4% 754,115

2016 36,610 5.4% 822,177

2017 38,575 10.3% 858,014

2020 47,163 5.6% 1,024,162

2025 57,454 3.5% 1,209,759

2031 70,747 3.2% 1,432,379

2032 (1–9) 72,944 3.1% 1,102,428

Source: Traffic Report

— 414 —


In forming our opinion of value, projected revenue from the final conclusions of the Traffic Report

was adopted as the basis of our valuation. As the traffic consult estimated the toll revenue based on

2014 price level, a toll rate adjustment factor was applied in order to match the cashflow forecast with

the discount rate, which is on nominal basis. We assumed standard toll charge would increase by 5%

every five years, that represents an average growth rate of 1% per annum. We considered the price

adjustment factor as prudent and applicable for this appraisal because (i) this is lower than the average

annual toll rate increment of 1.5% of the Company in the same region for the past fifteen years and (ii)

this is lower than the Economic Intelligent Unit (“EIU”)’s China inflation rate forecast as disclosed

in “Economic Overview” Section. As a result, revenue increases from RMB654.6 million in 2014

to RMB1340.0 million in 2032. The estimated revenue growth is attributable to (i) the estimated

adjustment to toll rate as discussed above and (ii) the increase in traffic volume as estimated by traffic

consultant. The revenue after adjustment is summarized as below table:

Revenue (RMB’000)

2014 2015 2016 2017 2018 2019 2020 2021

654,657 754,115 863,286 900,915 985,138 1,026,184 1,075,370 1,120,503

2022 2023 2024 2025 2026 2027 2028 2029

1,184,421 1,240,942 1,296,536 1,333,760 1,449,636 1,496,248 1,543,482 1,587,974

2030 2031 2032

1,617,208 1,741,065 1,340,009

Cost of Revenue and Operating Expenses

Cost and Operating Expenses mainly represent staff cost, administrative expenses and maintenance

expenses. The Cost and Operating Expenses estimated by traffic consultant are summarized in the

table below:

Cost and Operating Expenses (excluding depreciation and amortization expenses) (RMB’000)

2014 2015 2016 2017 2018 2019 2020 2021

139,637 148,762 154,853 152,318 161,919 169,925 178,789 183,451

2022 2023 2024 2025 2026 2027 2028 2029

191,509 199,522 207,776 215,971 224,507 233,300 242,451 251,900

2030 2031 2032

261,716 268,405 206,438


— 415 —


In the Traffic Report, driven by salary and benefit raise, staff cost is estimated to grow at 7% before

2020 and the growth rate gradually drop to 5% per year. Administrative expenses are expected to

grow at 1–1.5% yearly based on low historical growth rate. Routine Maintenance is consisted of two

parts, 40% related to traffic and 60% non-related to traffic. Special Maitenance is estimated based on

Management projection.

In forming our opinion of value, in addition to the staff cost, administrative expenses, and maintenance

expenses, we also added back the depreciation of fixed assets and amortization of expressway

operating right in the forecast. The total cost of revenue and operating expense was estimated to be

approximately RMB479.5 million in 2014 and eventually to RMB631 million in 2032. The cost of

revenue and operating expense including depreciation and amortization expenses are summarized as

below table:

Cost and Operating Expenses (including depreciation and amortization expenses) (RMB’000)

2014 2015 2016 2017 2018 2019 2020 2021

479,501 466,166 485,436 491,626 501,956 522,668 549,684 553,800

2022 2023 2024 2025 2026 2027 2028 2029

583,911 611,784 639,702 662,828 688,399 713,509 739,216 764,444

2030 2031 2032

787,527 810,011 630,980

Interest Expenses

Ningchang Zhenli Expressway Co. was expected to pay the interest with the outstanding loan

amounted to approximately RMB7.29 billion on the balance sheet as of the Valuation Date. According

to the Management, interest expenses of Ningchang Zhenli Expressway Co. would be tax deductible.

The impact of the tax shield effect on interest expenses of Ningchang Zhenli Expressway Co. on the

future cash flow is further discussed in subsequent section.

Income Tax

According to the tax circular, Guofa [2007] No.39 (國發[2007]39號), issued by the State Council of

the People’s Republic of China in 2007, Ningchang Zhenli Expressway Co. will be subject to 25%

profit tax rate. Such required tax rates will be applied in our cash flow calculation.

— 416 —


Capital Expenditures

Capital expenditures (“CAPEX”) include purchase or improvement of highway constructions and

equipment.

It is suggested by the Management to assume no future CAPEX would be required for the toll road as

all maintenance expenses were expensed in cost of revenue when incurred and included in the Traffic

Report. We considered this assumption would be consistent with the Company’s accounting policy

and general practice of toll road operation. Thus, CAPEX would be solely for replacement of the

transportation vehicles and office equipments.

Working Capital

From 2012 to 2013, working capital requirement as percentage of revenue of Ningchang Zhenli

Expressway Co. ranged from –5.4% to –1.9%. The negative working capital mainly attributed to the

payables for CAPEX. The payables amount is assumed to decrease afterwards. From a conservative

perspective, working capital was estimated at 1% of gross revenue throughout the forecasted period.

Long Term Investment

Ningchang Zhenli Expressway Co. holds two long term investments. We adopted net book value of

Jiangsu Modern Road & Bridge Co Limited) (3.62% shareholding) and Jiangsu Expressway Operation

& Management Co., Ltd. (7.5% shareholding) as our appraised value since the shareholding of these

companies are less than 10% and the investment amount was immaterial.

— 417 —


Discount Rate

The rate at which the annual net cash flows of Ningchang Zhenli Expressway Co. discounted to

present value is based on the estimated weighted average cost of capital (“WACC”), which is

equivalent to the unlevered cost of equity according to the APV method as described above.

The unlevered cost of equity for the Valuation was developed through the application of the Capital

Asset Pricing Model (“CAPM”), which is the most commonly adopted method of estimating the

required rate of return for equity. CAPM states that the cost of equity is the risk-free rate plus a

linear function of a measure of systematic risk (“Beta”) times equity market premium in general. In

estimating the Beta, we have observed the share price movement relative to overall equity market

index of comparable companies in the toll road industry with high proximity with Ningchang Zhenli

Expressway Co. in terms of geographical location as set out below. Comparable companies are

generally regarded to be subject to the same systematic risks as Ningchang Zhenli Expressway Co..

Comparable Companies Bloomberg Code

Zhejiang Expressway Co., Ltd. 576 HK

Sichuan Expressway Co. Ltd. 107 HK

Hopewell Highway Infrastructure Ltd. 737 HK

Anhui Expressway Co. Ltd. 995 HK

Shenzhen Expressway Co. Ltd. 548 HK

Jiangsu Expressway Co. Ltd. 177 HK

— 418 —


The computation of the estimated cost of equity is shown as follows:

Ke = Rf+ß(ERP)+SCP+CSR

Where

Ke = Required rate of

return for equity

Rf = Risk-free

rate of return

=3.95% The Rf is based on the yield on Chinese government’s

long-term bond as of the Valuation Date.

B = Unlevered Beta =0.57 Unlevered Beta is a measure of the relationship

between industry risk and the aggregate market in

all-equity scenario. It is based on the unlevered

Betas of the selected comparable companies.

Industry risk shall have already included the

uncertainties inherently applicable to the industry,

for example, the review on toll rate standards for all

the toll roads in China as indicated recently by the

Chinese Government.

ERP = Equity risk premium =7.4% The ERP is the expected return of the market (Rm) in

excess of the risk-free rate (Rf), or, is based on US

equity risk premium (extracted from Morningstar

Inc. SBBI Yearbook 2014)* plus the market

systematic risk in China.

SCP = Small-company

premium

=0.95% The SCP is necessary due to the small size of

company not captured by the CAPM. With

consideration of the fair market value of invested

captical of Ningchang Zhenli Expressway Co., we

selected SCP based on companies in the 3rd decile

(extracted from Morningstar Inc. SBBI Yearbook

2014).

— 419 —


CSR = Company Specific

Risk

=0.5% CAPM only capture systematic risks risks, which

cannot be diversified through holding a portfolio

of investments. In valuing a particular business,

company-specific risk premium should be

considered. In determining an appropriate company

specific risk premium, we used an internally

developed scorecard to assess various qualitative

risk factors specific to the Project Company,

including 1) operating history; 2) growth projection;

3) management track record; 4) stability of earning;

5) product/ services concentration risk; 6) degree

of reliance on key person; 7) degree of reliance on

key suppliers; and 8) degree of competition. In this

appraisal, we applied a risk premium of 0.5% to

reflect geographic concentration risk of the Subject

Company.

* Morningstar Inc. SBBI Yearbook is based on the original seminal study of Professor Roger Ibbotson and Rex Sinqufield, analyzing the long term returns of the principal asset classes in the United States economy. It provided the study on long term returns of the principal asset classes for over 25 years.

SBBI yearbook 2014 classified public listed companies into 10 deciles based on their market

capitalizations. The discounted present value of free cash flow indicates the Fundamental Value of

Ningchang Zhenli Expressway Co. to be RMB7,790 million. By comparing their Fundamental Value

to market capitalizations of Hong Kong listed companies, it was determined that Ningchang Zhenli

Expressway Co should fall into 3rd decile.

As such, our analysis concludes that a discount rate of 9.5% is considered appropriate for valuing

Ningchang Zhenli Expressway Co..

ADDITIONAL VALUATION CONSIDERATIONS

Adjustment of Tax Shield on Interest Expenses Attributable to the Loan Outstanding

Under the APV method, as the discount rate used was at all-equity financing level, an adjustment

was made by addition of the present value of tax shield arising from the interest expenses on the

outstanding loan balances of Ningchang Zhenli Expressway Co. during the projection period. The

discount rate used for calculation of the present value of the tax shield was the after-tax cost of debt of

4.91%, which was based on the latest long term loan benchmark rate announced by People’s Bank of

China at 6.55% and the standard tax rate of 25%.

— 420 —


Cash

Based on financial statement provided by the Management, as of the Valuation Date, Ningchang

Zhenli Expressway Co. had cash balance of RMB108 million.

Discount for Lack of Marketability (“DLOM”)

The concept of marketability deals with the liquidity of an ownership interest, that is, how quickly

and easily it can be converted to cash if the owner chooses to sell. The lack of marketability discount

reflects the fact that there is no ready market for shares in a closely held corporation. Ownership

interests in closely held companies are typically not readily marketable compared to similar interests

in public companies. Therefore, a share of stock in a privately held company is usually worth less than

an otherwise comparable share in a publicly held company.

In the Valuation, option-pricing method was used as the primary method to estimate the DLOM.

Valuation alternative available in determining the DLOM include restricted share studies and

differential in P/E multiples in acquiring public and privately held companies. In this transaction, we

considered option pricing method as more appropriate because (1) put option pricing model explicitly

takes into account of volatility factor of guideline companies and better reflects the impact of industry

conditions on liquidity of the Project Company’s equity interest; and (2) put option pricing model

reflects the leading time to liquidity event of the Project Company (i.e. estimated time for completion

of this transaction).

Under option-pricing method, the cost of put option, which can hedge the price change before the

privately held shares can be sold, was considered as a basis to determine the lack of marketability

discount. The cost of put option was determined by Black Scholes option pricing with consideration of

the estimated time required to sell the subject company’s shares and volatility of the company’s share

during that period. Generally speaking, the farther the valuation date is from an expected liquidity

event, the higher the put option value and thus the higher the implied DLOM. The DLOM derived

from option-pricing method was 5%.

— 421 —


DLOM Valuation - Black-scholes model

The Dividend Adjusted Black-Scholes Option Pricing Model was used in estimation of the Company’s

DLOM. Following is the formula of Dividend Adjusted BS-Model:

Price of put option= K* e-rt* N(–d2) – S*e-yt* N(–d

1)

Where

d1

= [ln (S/K)+(R-Y+δ/2)*T ] / (δ*√T)

d2

= d1 –δ*√T

S = Fair market value per share as of valuation date

K = Exercise price

T = Expected time to exercise (years)

R = Risk free interest rate

σ = Standard derivation in the value of the underlying stock

Y = Dividend yield of the underlying stock

Valuation Assumptions for Black-scholes model

In calculating the DLOM, the following major assumptions were adopted:

(1) Fair market value per share as of valuation date and Exercise Price

Assumed that the fair market value per share and the exercise price is equal as 1.00. In applying

option pricing method, it is common to assume the base value of the underlying equity interest

to be $1. The estimated value of put option, relative to $1 base value of underlying equity

interest, shall represent an applicable DLOM to be applied on the estimated equity interest of

Project Company.

(2) Expected time to exercise (years)

The expected time to exercise is assumed to be 0.5 years, which is the estimated time span for

completion of the Acquistion.

(3) Risk Free Interest Rate

Risk free interest rate is estimated based on the market yield of China International Government

Bond with maturity closer to the expected time to exercise as of the valuation date, i.e. 2.581%.

— 422 —


(4) Dividend Yield

Per discussion with the Management, dividend yield is estimated as 0%.

(5) Volatility

Expected volatility is estimated as 23% based on average historical volatility of comparable

companies for the period of time close to the expected time to exercise. The comparable

companies are: Zhejiang Expressway Co., Ltd., Sichuan Expressway Co. Ltd., Hopewell

Highway Infrastructure Ltd., Anhui Expressway Co. Ltd., Shenzhen Expressway Co. Ltd. and

Jiangsu Expressway Co. Ltd.

Sensitivity Analysis

As part of the Valuation, sensitivity analysis of value were performed. We tested sensitivity of the

value by changing the following parameters:

• discount rates;

• revenue growth;

• DLOM.

Table below shows sensitivity analysis on the fair market value of equity interest of Ningchang Zhenli

Expressway Co. (in RMB’000) was made by varying the discount rate with revenue assumptions

under the Base Case, 10% above the revenue of Base Case in each of projection period (“Base Case

+10%”) and 10% below the revenue of Base Case in each of projection period (“Base Case–10%”),

respectively.

Discount Rate

Revenue 7.5% 8.5% 9.5% 10.5% 11.5%

Base Case+10% 2,414,000 1,793,000 1,242,000 748,000 305,000

Base Case 1,583,000 1,021,000 522,000 75,000 (326,000)

Base Case–10% 751,000 248,000 (198,000) (598,000) (957,000)

— 423 —


Table below shows sensitivity analysis on the fair market value of equity interest of Ningchang Zhenli

Expressway Co. (in RMB’000) was made by varying the DLOM:

DLOM 0% 5% 10%

Fair market value of equity interest of

Ningchang Zhenli Expressway Co. 549,000 522,000 494,000

Conclusion of Value

Based upon the investigation and analysis outlined above, it is our opinion that the fair market value

of 100% equity interest in the business enterprise of Ningchang Zhenli Expressway Co., Ltd as of

the Valuation Date is reasonably stated as RENMINBI FIVE HUNDRED AND TWENTY TWO

MILLION (RMB522,000,000).

This conclusion of value is based on generally accepted valuation procedures and practices that rely

extensively on the use of numerous assumptions and the consideration of many uncertainties, not all of

which can be easily quantified or ascertained.

We do not provide assurance on the achievability of any financial results estimated by the Management

because events and circumstances frequently do not occur as expected; differences between actual and

expected results may be material; and achievement of the forecasted results is dependent on actions,

plans, and assumptions of Management.

We have not investigated the title to or any liabilities against the property appraised.

We hereby certify that we have neither present nor prospective interests, direct or indirect, in the

Company, Ningchang Zhenli Expressway Co., and/or the other investments of Ningchang Zhenli

Expressway Co. or the value reported.

Respectfully submitted,


AMERICAN APPRAISAL CHINA LIMITED

Kevin Leung

Vice President and Director

Note: Mr. Kevin Leung has been involved in business valuation for the purpose of joint venture, merger and acquisition and public listing for over 11 years. Mr. Leung has prior experience in conducting equity interest valuation to Hong Kong listed China based toll road companies. He is a fellow member of the Association of Chartered Certified Accountants and charterholder of the Chartered Financial Analyst.

This valuation was prepared under the supervision of Mr. Leung as project-in-charge with significant professional assistance from Ms. Tracy Chow, Mr. Edison Yan, and Ms. Serina Bai.

— 424 —


II. The following is the text of a report from Deloitte Touche Tohmatsu Certified Public

Accountants LLP, the reporting accountants, prepared for the purpose of incorporation in this

circular, confirming the valuation of Ningchang Zhenli.


Deloitte Touche TohmatsuCerti�ed Public Accountants LLP30/F Bund Center222 Yan An Road EastShanghai 200002, PRC

ACCOUNTANTS’ REPORT ON CALCULATIONS OF DISCOUNTED FUTURE

ESTIMATED CASH FLOW IN CONNECTION WITH VALUATION OF EQUITY

INTEREST OF JIANGSU NINGCHANG ZHENLI EXPRESSWAY COMPANY LIMITED

TO THE DIRECTORS OF JIANGSU EXPRESSWAY COMPANY LIMITED

We have examined the calculations of the discounted future estimated cash flows on which

the valuation prepared by American Appraisal China Limited dated 23 January 2015, of a

100% equity interest in Jiangsu Ningchang Zhenli Expressway Company Limited (“Ningchang

Zhenli”) as at 30 September 2014 (the “Valuation”) is based. Ningchang Zhenli is a company

established in Jiangsu whose principal activities are construction and operation of toll road with

Jiangsu Province, the People’s Republic of China (the “PRC”). The Valuation based on the

discounted future estimated cash flows are regarded as a profit forecast under Rule 14.61 of the

Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the

“Listing Rules”) and will be included in a circular dated 23 January 2015 issued by Jiangsu

Expressway Company Limited (the “Company”) in connection with the acquisition of 100%

equity interest in Ningchang Zhenli (the “Circular”).

DIRECTORS’ RESPONSIBILITY FOR THE DISCOUNTED FUTURE ESTIMATED

CASH FLOWS

The directors of the Company are responsible for the preparation of the discounted future

estimated cash flows in accordance with the bases and assumptions determined by the directors

and set out in the section headed “The general principle and method for determining price in

affiliated transaction/connected and major transaction” of the Circular (the “Assumptions”).

This responsibility includes carrying out appropriate procedures relevant to the preparation of

the discounted future estimated cash flows and applying an appropriate basis of preparation; and

making estimates that are reasonable in the circumstances.

— 425 —


REPORTING ACCOUNTANTS’ RESPONSIBILITY

It is our responsibility to form an opinion on the arithmetical accuracy of the calculations of the

discounted future estimated cash flows on which the Valuation is based and to report solely to

you, as a body, as required by Rule 14.62(2) of the Listing Rules, and for no other purpose. We

do not assume responsibility towards or accept liability to any other person for the contents of

this report.

Our engagement was conducted in accordance with Hong Kong Standard on Assurance

Engagements 3000 “Assurance Engagements Other Than Audits or Reviews of Historical

Financial Information” issued by the Hong Kong Institute of Certified Public Accountants. This

standard requires that we comply with ethical requirements and plan and perform the assurance

engagement to obtain reasonable assurance on whether the discounted future estimated cash

flows, so far as the calculations are concerned, have been properly compiled in accordance with

the Assumptions. Our work does not constitute any valuation of Ningchang Zhenli.

Because the Valuation relates to discounted future estimated cash flows, no accounting policies

of the Company have been adopted in its preparation. The Assumptions include hypothetical

assumptions about future events and management actions which cannot be confirmed and

verified in the same way as past results and these may or may not occur. Even if the events and

actions anticipated do occur, actual results are still likely to be different from the Valuation and

the variation may be material. Accordingly, we have not reviewed, considered or conducted any

work on the reasonableness and the validity of the Assumptions and do not express any opinion

whatsoever thereon.

OPINION

Based on the foregoing, in our opinion, the discounted future estimated cash flows, so far as the

calculations are concerned, have been properly compiled, in all material respects, in accordance

with the Assumptions.


Shanghai, China

23 January 2015

— 426 —


III. The following is the text of a letter from the Board in connection with the profit forecast

included in the valuation report set out in part I of Appendix IVA of this circular prepared for

the purpose of incorporation in this circular.



23 January 2015


Dear Sir or Madam,

CONFIRMATION FROM THE BOARD IN RESPECT OF THE PROFIT FORECAST

Reference is made to the the Company’s announcement dated 31 December 2014 and the

circular of the Company dated 23 January 2015) (the “Circular”) in respect of the connected

and major transaction. Capitalised terms defined in the Circular shall have the same meanings

when used in this letter, unless the context otherwise requires.

As disclosed in the section headed “the general principle and method for determining price

in affiliated transaction/connected and major transaction” of the Circular, the valuation report

set out in Part I of Appendix IVA of the Circular contained valuation in respect of Ningchang

Zhenli which was arrived at using the income approach, hence such valuation shall be regarded

as a profit forecast pursuant to Rule 14.61 of the Hong Kong Listing Rules.

Since Ningchang Zhengli shall become a subsidiary of the Company following completion

of the Transactions and that no financial adviser has been appointed in connection with the

Transactions, we hereby confirm, pursuant to Rule 14.62 of the Hong Kong Listing Rules, that

the profit forecasts contained in the Circular have been made by the Board after due and careful

enquiry.

Yours faithfully,


The Board of Directors


— 427 —

APPENDIX IVB VALUATION REPORT OF XIYI COMPANY

I. The following is the text of a report prepared for the purpose of incorporation in this Circular

received from an independent valuer in connection with their assessment of the valuation of Xiyi

Company.

January 23, 2015

The Directors

Jiangsu Expressway Company Limited6 Xianlin Avenue, Qixia District

Nanjiang, Jiangsu Province

P.R. China

Our Ref.: GS14/0602(B)

Dear Sirs,

VALUATION OF EQUITY INTEREST OF JIANGSU XIYI EXPRESSWAY CO., LTD

Pursuant to the terms, conditions and purpose of an engagement agreement dated September 23,

2014 (the “Engagement Agreement”) between Jiangsu Expressway Company Limited (“Jiangsu Expressway” or the “Company”) and American Appraisal China Limited (“American Appraisal”),

we have performed an analysis of fair market value of the 100% equity interest in the business

enterprise (the “Valuation”) of 江蘇錫宜高速公路有限公司 (Jiangsu Xiyi Expressway Co., Ltd)

(“Xiyi Expressway Co.” or “Project Company”). We understand that 江蘇廣靖錫澄高速公路有限責任公司(Jiangsu Guangjing Xicheng Expressway Company Limited) (“Guangjing Xicheng”, a

85%-owned subsidiary of Jiangsu Expressway, is contemplating the acquisition of 100% interest in

Jiangsu Xiyi Expressway Co Limited. (the “Acquisition”). Our Valuation is prepared as at September

30, 2014 (“Valuation Date”).

This letter identifies the business appraised, describes the scope of work, states the basis of value,

specifies key inputs and assumptions, explains the valuation methodology utilized, and presents our

conclusion of value. We prepared this Valuation Report in accordance with the International Valuation

Standards which are issued by the International Valuation Standards Council. In preparing our

report, we aim to largely comply with the reporting requirements recommended by the International

Valuation Standards which are issued by the International Valuation Standards Council. This valuation

is addressed to Jiangsu Expressway for the intended use as stated below. Supporting documentation

concerning these matters has been retained in our work papers.

— 428 —


We understand that Jiangsu Expressway, with our consent, will disclose this letter in the circular

for their shareholders and to The Stock Exchange of Hong Kong Limited (the “Stock Exchange”)

pursuant to the requirements of the Rules Governing the Listing of Securities on The Stock Exchange

of Hong Kong Limited. No third party shall have the right of reliance on this letter and neither

receipt nor possession of this letter by any third party shall create any express or implied third-party

beneficiary rights.

PURPOSE OF THE VALUATION

Guangjing Xicheng, a 85%-owned subsidiary of Jiangsu Expressway, intends to acquire 100% interest

of Jiangsu Xiyi Expressway Co Limited (“Xiyi Expressway Co”). Xiyi Expressway Co., is principally

engaged in operation and management of Xiyi Expressway (including Luma road) and Taihu circular

expressway in Jiangsu Province. A traffic study of Xiyi expressway and Taihu circular Expressway

dated December 10, 2014 (the “Traffic Report”) was undertaken by Jiangsu Weixin Engineering

Consultants Ltd (江蘇緯信工程諮詢有限公司) (the “Traffic Consultant”). With approval of

Jiangsu Expressway and as stipulated in the Engagement Agreement, in formulating our opinion on

the Valuation, we relied upon the completeness and accuracy of operational and financial information

provided by the Management, including the Traffic Report.

The intended use of the Valuation is to provide Jiangsu Expressway additional reference on the basis

of the purchase price for the Acquisition. The purchase price was arrived at after negotiations between

the contracting parties (being Guangjing Xicheng and Xiyi Expressway Co’s existing shareholders).

The responsibility for final determination of the agreed acquisition price does not rest on American

Appraisal. Our opinion of fair market value should not be construed to be a solvency opinion or an

investment recommendation. It is inappropriate to use our valuation report for purpose other than

its intended use or by third parties. These third parties should conduct their own investigation and

independent assessment of the prospective financial information and underlying assumptions.

BASIS OF THE VALUATION

The Valuation was prepared on the basis of fair market value standard under the premise of continued

use. Fair market value is defined as the price that would be received to sell an asset or paid to transfer

a liability in an orderly transaction between market participants at the measurement date.

Our opinion of value was established under the premise of continued use, which reflects the condition

where the buyer and the seller contemplate retention of the business and related assets as part of

current or forecast operations.

— 429 —


Business enterprise is defined for this appraisal as the total invested capital, that is, equivalent to the

combination of all interest-bearing debts, shareholders’ loans and shareholders’ equity. Alternatively,

the business enterprise is equivalent to the combination of all tangible assets (buildings, machinery and

equipment), long-term investment, net operating working capital and intangible assets of a continuing

business. Equity interest is equivalent to business enterprise value less interest-bearing debts.

TRAFFIC REPORT

The Traffic Report on the projected revenue of Xiyi Expressway Co., was prepared by the Traffic

Consultant dated December 10, 2014. It provides the projected revenue and expenses of Xiyi

Expressway Co., between 2014 and 2031. The Traffic Consultant has been involved in several national

road traffic projects in different provinces in China including projects of listed companies and was

hired by the Management of Jiangsu Expressway as its traffic consultant in this Valuation. We relied

on the revenue and expenses projections provided by the Traffic Consultant as basis in forming our

opinion of value. In considering whether the Traffic Report is an appropriate basis for this valuation,

we performed the following procedures:

• Review of credential and track records of the Traffic Consultant in preparing reports for similar

transactions;

• Discussion with the Traffic Consultant to understand the assumptions, methodologies and

conclusions of the Traffic Report;

• Analysis of the industry, competitive and regulatory environment of related businesses through

review of relevant market and industry reports;

• Analysis of the Project Company’s historical financial performance by the management;

• Discussion with the management regarding the nature and operation and financial conditions of

the Project Company;

• Analysis of financial ratios of companies engaged in the same or similar lines of businesses.

— 430 —


DESCRIPTION OF XIYI EXPRESSWAY CO.,

Xiyi Expressway Co., was established in September 11, 2000. Its registered capital is RMB824.17

million. It is engaged in management and operation of Xiyi Expressway. Its shareholders include

江蘇交通控股有限公司 (Jiangsu Communications Holdings Limited) (with a shareholding of

approximately 78.40%), 無錫高速公路投資有限公司 (Wuxi Expressway Investment Company

Limited) (with a shareholding of approximately 16.78%) and 常州高速公路投資發展有限公司 (Changzhou Expressway Investment Development Company Limited) (with a shareholding of

approximately 4.82%).

Xiyi Expressway Co., has three operating assets:

1) Xiyi expressway, connecting Wuxi and Yixing, with total mileage of 69.3 Km, was completed

on September 30, 2003.

2) Luma road, connecting Xiyi expressway and Luma resort, with total mileage of 10 Km, was

completed on January 22, 2005.

3) Taihu circular expressway, with total mileage of 20 Km, was completed on October 15, 2006.

Guangjing Xicheng plans to acquire 100% interest in Xiyi Expressway Co., to operate the expressway

assets and since then it has been entitled to all the revenue and benefits derived from the expressway

assets until October, 2031.

Xiyi Expressway Co. also holds two long term investments: 江蘇現代路橋有限責任公司 (Jiangsu

Sundian Engineering Co., Ltd.) (7.5% shareholding), 江蘇高速公路聯網營運管理有限公司 (Jiangsu

Expressway Network Operation & Management Co., Ltd.) (3.6% shareholding). As of the Valuation

Date, these two investments were recorded at cost.

FINANCIAL REVIEW

According to the audited consolidated financial statements of Xiyi Expressway Co., the consolidated

net asset value as at September 30, 2014 amounted to approximately RMB659.37 million; and the

consolidated net loss after taxation for the financial year ended September 30, 2014 was approximately

RMB3.4 million. The consolidated cash balance was approximately RMB45.95 million as of the

Valuation Date. Consolidated total liabilities as of the Valuation Date was approximately RMB1.8

billion.

— 431 —


ECONOMIC OVERVIEW

A sound appraisal of a business or business interest must consider current and prospective economic

conditions, in both the national economy and the industry or industries with which the Project

Company is allied. The major variables reviewed in order to evaluate the overall state of the national

economy include economic growth, inflation rate and exchange rate. As China is the major market for

the Project Company, an overview of the economy of China is essential to develop this outlook. The

following economic discussion is extracted from Economic Intelligence Unit (“EIU”) “China: Country

outlook” on September 5, 2014. According to website of EIU, established in 1946, it is the research

and analysis division of The Economist Group, the sister company to The Economist newspers. It

has over 60 years of experiences in providing forecasting and advisory services through research and

analysis to financial firms, businesses and government. In preparing data and statistics, EIU uses

primary research techniques and fieldwork. Its methodologies, frameworks and analytical tools are

both quantitative and qualitative. Economic Intelligence Unit was not commissioned by the Company,

its connected persons or any of their associates.

• Economic Growth: Real GDP growth accelerated to 7.5% year on year in April-June, from

7.4% in the first quarter. This suggests that the government’s “mini-stimulus package”, which

involved a modest loosening of monetary and fiscal policy, has gained traction. EIU forecasts

that the economy will expand by 7.5% in 2014 as a whole. Given that the government’s real

GDP growth target of “about 7.5%” is within reach, EIU expects policy to shift to a neutral

stance in the second half of the year, as the focus of policymakers returns to addressing

structural issues in the economy, for example by reining in credit growth. Nonetheless, weaker

data for July show that the economic outlook remains fragile. If growth slows again, further

stimulus measures could be introduced.

• Inflation: EIU expects annual consumer price inflation to average 3.1% in 2014-18. Over the

period as a whole improved transport logistics, an expected decline in global oil costs and the

anticipated strengthening of the renminbi will help to rein in price increases. However, rapid

domestic demand growth and weaker expansion in the supply of products (as investment slows)

will generate inflationary pressures. The threat of a bad harvest pushing food prices sharply

higher will remain. Producer prices will be flat on average in 2014-15, as excess industrial

capacity will continue to weigh on prices.

• Exchange Rate: Despite the renminbi’s weakness early this year, EIU believes that the

currency will appreciate against the US dollar in 2014 as a whole. A strong rise in foreign-

exchange reserves in the first half of the year indicated that the currency’s depreciation had

been engineered by the authorities, probably in an effort to deter speculative capital inflows.

However, EIU believes that they remain committed in the long term to scaling back such heavy

intervention, as this is tied to policy goals such as the rebalancing of the economy and the

renminbi’s internationalisation. EIU expects the local currency to continue to strengthen slowly

against the US dollar in 2015-17, before depreciating in 2018 as China’s external position

weakens.

— 432 —


INDUSTRY OVERVIEW

The industry discussion below was extracted from the equity research reports published by

Morningstar, Inc. and United Bank of Switzerland on August 26, 2014 and August 25, 2014,

respectively.

Regional economic expansion is the key driver for the traffic growth. As part of China’s 12th Five-

Year Plan (2011–2015), Jiangsu province targets 10% compound annual GDP growth, well above

the nationwide target of 7.5%, which is expected to support low-to-mid single digit traffic growth.

Furthermore, the trend of industrial activity moving from coastal to inland regions, such as Anhui,

Hubei and Henan provinces, may benefit cargo and truck traffic growth from increased demand from

regional logistics operators. In addition, the continued growth of private car ownership in Jiangsu

province will further boost traffic growth.

Policy risk had been a major concern for the toll road sector previously. However, with Ministry of

Transport’s proposal of a new revised “Toll Road Management Ordinance” which allows concession

extensions, the policy risk is already behind us. Furthermore, toll road operators will benefit from

improving traffic and better revenue/vehicle from truck recovery.

SCOPE OF WORKS AND KEY ASSUMPTIONS

Our investigation included discussions with the Management and the Traffic Consultant with regard

to the history, operations and prospects of Xiyi Expressway Co., an overview of certain financial data,

an analysis of the industry and competitive environment, an analysis of comparable companies, and a

review of operating statistics and other relevant documents, whenever available.

We also made reference to or reviewed the following major documents and data:

• financial statements of Xiyi Expressway Co. for the financial years ended 31 December 2010,

2011, 2012, 2013 and nine months ended 30 September 2014;

• draft copies of the internal documents to acquire the 100% interest in Xiyi Expressway Co.

through Guangjing Xicheng;

• a copy of the Traffic Report with financial projection and the breakdown of major operating

expenses prepared;

• breakdown of historical revenue, cost of revenue and operating expenses of Xiyi Expressway

Co.;

— 433 —


• summary of key terms of bank borrowing of Xiyi Expressway Co.; and

• other documents that we considered relevant.

We assumed that the data we obtained in the course of the Valuation, along with the opinions and

representations provided to us by the Management are true and accurate and accepted them without

independent verification except as expressly described herein. We have no reason to suspect that any

material facts have been omitted, nor are we aware of any facts or circumstances, which would render

the information, opinion and representations made to us to be untrue, inaccurate or misleading. In

arriving at our opinion of value, we have considered the following principal factors:

• the stage of development of Xiyi Expressway Co.;

• the historical costs and current financial condition of Xiyi Expressway Co.;

• the Traffic Report provided by the Traffic Consultant;

• the economic outlook for China and specific competitive environments affecting the toll road

industry;

• the legal and regulatory issues of the toll road industry in general and other specific legal

opinions relevant;

• the risks of Xiyi Expressway Co.; and

• the experience of the Management.

Due to the changing environments in which Xiyi Expressway Co. is operating, a number of

assumptions have to be made in arriving at our value conclusion. The key assumptions adopted in the

Valuation are:

• no major changes are expected in the political, legal and economic conditions in China;

• industry trend and market conditions for toll road industry in China will continue to develop

according to prevailing market expectations;

• there will be no major changes in the current taxation law and/or taxation rates applicable to

Xiyi Expressway Co.;

— 434 —


• the operation of Xiyi Expressway Co. will not be constrained by the availability of finance;

• future exchange rates and interest rates movement will not differ materially from prevailing

market expectations; and

• Xiyi Expressway Co. will retain competent management, key personnel and technical staff to

support its ongoing operations.

VALUATION METHODOLOGY AND ASSUMPTIONS

In the appraisal of the equity, or the net assets, of a business, regardless of their diversity, location,

or technological complexity, there are three basic approaches to value. The descriptive titles typically

attached to these approaches are cost, income, and market. In normal circumstances, the appraiser

is obliged to consider all three approaches, as any, or perhaps all, may provide reliable measures of

value.

Cost approach established value based on the cost of reproducing or replacing the property less

depreciation from physical deterioration and functional and economic obsolescence, if present and

measurable. This approach might be considered the most consistently reliable indication of value

for assets without a known used market or separately identifiable cash flows attributable to assets

appraised.

Income approach is the conversion of expected periodic benefits of ownership into an indication of

value. It is based on the principle that an informed buyer would pay no more for the property than an

amount equal to the present worth of anticipated future benefits (income) from the same or equivalent

property with similar risk.

Market approach considers prices recently paid for similar assets, with adjustments made to the

indicated market prices to reflect condition and utility of the appraised assets relative to the market

comparable. Assets for which there is an established used market may be appraised by this approach.

To develop our opinion of value, the three generally accepted approaches to value are considered:

cost, market and income. We have not identified any market transactions which are comparable

because each toll road may be unique and may have different considerations on transaction price

which depends on many factors such as location, toll rate, traffic volume, stage of operation and status

of the toll road assets. While useful for certain purposes, the cost approach is generally not considered

applicable to the valuation of a going concern, as it does not capture future earning potential of the

business. Thus both market approach and cost approach were not utilized in the Valuation. Therefore,

we relied upon the income approach, known as the discounted cash flow method, in forming our

opinion of value.

— 435 —


INCOME APPROACH

Under the discounted cash flow method, it explicitly recognizes that the current value of an investment

is premised upon the expected receipt of future economic benefits such as periodic income, cost

savings, or sale proceeds. Indication of value is developed by discounting future net cash flow to the

present value at a rate that reflects both the current return requirements of the market and the risks

inherent in the specific investment.

As Xiyi Expressway Co. was set up for such toll road project, its capital structure will change due to

debt repayment or additional borrowing. The Adjusted Present Value (the “APV”) method was used

in order to exclude the distortion resulting from the change in capital structure over the concession

period. In the Valuation, the APV method values an enterprise or project by discounting projected free

cash flows at a rate of return assuming all-equity financing as fundamental value (the “Fundamental

Value”). We then added the Fundamental Value to the present value of tax shield effect and less total

outstanding debt, to arrive at fair market value of the equity interest.

DEFINITION OF FREE CASH FLOW

The term free cash flow (“FCF”) can be represented by the following equation:

FCF = NI + DEPR + INT – CAPEX – NWC

Where:

FCF = projected free cash flow available to equity and debt holders

NI = net income after tax

DEPR = depreciation and amortization expenses

INT = interest expense after tax

CAPEX = capital expenditures

NWC = changes in net working capital (current assets net of current liabilities)

A major requirement of the DCF method is an earnings forecast, in particular a cash flow projection.

The yearly FCF for the projection period of 2014 to 2031 was derived based on the above formula.

The operating right of Xiyi Expressway Co. will expire in 2031, hence the enterprise was assumed to

transfer the expressways back to the government upon the termination of the concession period.

— 436 —


PROJECTION ASSUMPTION

The major projection assumptions were listed as below:

Revenue

Revenue is mainly driven by imposing toll charges on vehicles using the road for transportation

purposes. In the Traffic Report, vehicles are charged according to their type, weight and the distance

of road the vehicles have taken for transport. Historical traffic data, economic researches, transport

indexes, etc., were considered by the Traffic Consultant in their projections. Standard toll charge of

each vehicle type is assumed unchanged over the period of the concession right. Thus, the revenue

growth would be driven by the increase in traffic and/or change in traffic mix by vehicle type.

The operation right of Xiyi expressway and Luma road will expire in 2028 while the right of Taihu

circular expressway will expire in 2031. The traffic volume and toll revenue (base on 2014 price level)

estimated by traffic consultant are summarized in the table below:

Year Traffic volume Growth rate Toll revenue

(veh/day) (RMB’000/year)

2014 24,769 10.7% 273,985

2015 27,364 10.5% 297,837

2020 41,905 7.7% 429,329

2025 80,179 46.3% 602,758

2028 89,121 3.3% 539,483

2029 52,153 –41.5% 156,129

2030 53,479 2.5% 158,463

2031 54,766 2.4% 133,926


— 437 —


In forming our opinion of value, projected revenue from the final conclusions of the Traffic Report

was adopted as the basis of our valuation. As the traffic consult estimated the toll revenue based on

2014 price level, a toll rate adjustment factor was applied in order to match the cash flow forecast

with the discount rate, which is on nominal basis. We assumed standard toll charge would increase by

5% every five years that represents an average growth rate of 1% per annum. We considered the price

adjustment factor as prudent and applicable for this appraisal because (i) it is lower than the average

annual toll rate increment of 1.5% of the Company in the same region for the past fifteen years and

(ii) it is lower than the Economic Intelligent Unit (“EIU”) ‘s China inflation rate forecast as disclosed

in “Economic Overview” Section. As a result, revenue increases from RMB274 million in 2014 to

RMB749 million in 2027. Then the total revenue starts to decrease in 2028 due to the expiration of

concession right of Xiyi expressway and Luma road. In 2031, the concession right of Taihu circular

expressway will also expire, leading to a further revenue decrease. The estimated revenue growth is

attributable to (i) the estimated adjustment to toll rate as discussed above and (ii) the increase in traffic

volume as estimated by traffic consultant. The revenue after adjustment is summarized as below table:

Revenue (RMB’000)

2014 2015 2016 2017 2018 2019 2020 2021

273,985 297,837 339,120 366,817 395,044 422,018 450,795 524,576

2022 2023 2024 2025 2026 2027 2028 2029

553,824 582,040 609,590 664,541 724,316 748,929 624,519 180,738

2030 2031

183,440 162,788

Cost of Revenue and Operating Expenses

Cost and Operating Expenses mainly represent staff cost, general administrative expenses and

maintenance expenses. The Cost and Operating Expenses excluding depreciation and amortization

expenses estimated by Traffic Consultant are summarized in the table below:

— 438 —


Cost and Operating Expenses (excluding depreciation and amortization expenses) (RMB’000)

2014 2015 2016 2017 2018 2019 2020 2021

75,590 79,382 81,477 86,260 91,300 96,590 102,195 107,330

2022 2023 2024 2025 2026 2027 2028 2029

112,244 117,349 122,671 130,613 136,422 142,482 120,482 36,953

2030 2031

38,465 33,062


In the Traffic Report, staff cost is driven by the increase in average salaries and benefits increase.

The growth rate before 2020 is assumed to be 7% annually and gradually decrease to 3% at the end

of projection period. Administrative expenses are assumed to grow 2% per annum. In forming our

opinion of value, in addition to the staff cost, administrative expenses and maintenance expenses, we

also added back the depreciation expenses in the forecast and considered its tax impact on the final

result. The total cost of revenue and operating expense was estimated to be approximately RMB75.6

million in 2014 and eventually to RMB142.5 million in 2027. Then the total cost of revenue and

operating expenses will start to decrease along with the trend of revenue. The cost of revenue and

operating expenses including depreciation and amortization expenses are summarized as below table:

Cost and Operating Expenses (including depreciation and amortization expenses) (RMB’000)

2014 2015 2016 2017 2018 2019 2020 2021

169,750 169,052 170,529 180,416 187,020 199,674 212,779 229,029

2022 2023 2024 2025 2026 2027 2028 2029

241,252 253,368 265,602 337,308 350,977 364,542 349,630 173,271

2030 2031

178,113 174,859

— 439 —


Interest Expenses

Xiyi Expressway Co. was expected to pay the interest with the outstanding loan amounted to

approximately RMB1,794 million on the balance sheet as of the Valuation Date. According to the

Management, interest expenses of Xiyi Expressway Co. would be tax deductible. The impact of the tax

shield effect on interest expenses of Xiyi Expressway Co. on the future cash flow is further discussed

in subsequent section.

Income Tax

According to the tax circular, Guofa [2007] No.39 (國發[2007]39號), issued by the State Council of

the People’s Republic of China in 2007, Xiyi Expressway Co. will be subject to 25% profit tax rate.

Such required tax rate is applied in our cash flow calculation.

Capital Expenditures

Capital expenditures (“CAPEX”) include purchase or improvement of highway constructions and

equipment.

It is suggested by the Management to assume no future CAPEX would be required for the toll road as

all maintenance expenses were expensed in cost of revenue when incurred and included in the Traffic

Report. We considered this assumption would be consistent with the Company’s accounting policy and

general practice of toll road operation. Thus, CAPEX would be solely for renewal of the transportation

vehicles and office equipments.

Working Capital

From 2012 to 2013, working capital requirement as percentage of revenue of Xiyi Expressway Co.

ranged from -3.1% to 0.8%. From a conservative perspective, working capital was estimated at 1% of

gross revenue mainly attributed to the decreasing balance of payables for CAPEX.

Long Term Investment

Xiyi Expressway Co. holds two long term investments: Jiangsu Sundian Engineering Co., Ltd. and

Jiangsu Expressway Network Operation & Management Co., Ltd. Since the shareholding of the

companies are less than 10% and the investment amount was immaterial as our appraised value, we

adopted book value as the value results.

— 440 —


Discount Rate

The rate at which the annual net cash flows of Xiyi Expressway Co. discounted to present value

is based on the estimated weighted average cost of capital (“WACC”), which is equivalent to the

unlevered cost of equity according to the APV method as described above.

The unlevered cost of equity for the Valuation was developed through the application of the Capital

Asset Pricing Model (“CAPM”), which is the most commonly adopted method of estimating the

required rate of return for equity. CAPM states that the cost of equity is the risk-free rate plus a

linear function of a measure of systematic risk (“Beta”) times equity market premium in general. In

estimating the Beta, we have observed the share price movement relative to overall equity market

index of comparable companies in the toll road industry with high proximity with Xiyi Expressway

Co. in terms of geographical location as set out below. Comparable companies are generally regarded

to be subject to the same systematic risks as Xiyi Expressway Co.

Comparable Companies Bloomberg Code

Zhejiang Expressway Co., Ltd. 576 HK

Sichuan Expressway Co. Ltd. 107 HK

Hopewell Highway Infrastructure Ltd. 737 HK

Anhui Expressway Co. Ltd. 995 HK

Shenzhen Expressway Co. Ltd. 548 HK

Jiangsu Expressway Co. Ltd. 177 HK

— 441 —


The computation of the estimated cost of equity is shown as follows:

Ke = Rf+ß(ERP)+SCP+CSR

Where

Ke = Required rate of

return for equity

Rf = Risk-free = 3.95% The Rf is based on the yield on

rate of return Chinese government’s long-term bond as of

the Valuation Date.

β = Unlevered Beta = 0.57 Unlevered Beta is a measure of the relationship

between industry risk and the aggregate market in

all-equity scenario. It is based on the unlevered

Betas of the selected comparable companies.

Industry risk shall have already included the

uncertainties inherently applicable to the industry,

for example, the review on toll rate standards for all

the toll roads in China as indicated recently by the

Chinese Government.

ERP = Equity risk premium = 7.4% The ERP is the expected return of the market (Rm) in

excess of the risk-free rate (Rf), or, is based on US

equity risk premium (extracted from Morningstar

Inc. SBBI Yearbook 2014)* plus the market

systematic risk in China.

SCP = Small-company = 1.19% The SCP is necessary due to the premium small

size of company not captured by the CAPM. With

consideration of the fair market value of total

invested capital of Xiyi Expressway Co., we selected

SCP based on companies in the 4th decile (extracted

from Morningstar Inc. SBBI Yearbook 2014)

— 442 —


CSR = Company Specific

Risk

= 0.5% CAPM only capture systematic risks risks, which

cannot be diversified through holding a portfolio

of investments. In valuing a particular business,

company-specific risk premium should be

considered. In determining an appropriate company

specific risk premium, we used an internally

developed scorecard to assess various qualitative

risk factors specific to the Project Company,

including 1) operating history; 2) growth projection;

3) management track record; 4) stability of earning;

5) product/ services concentration risk; 6) degree

of reliance on key person; 7) degree of reliance on

key suppliers; and 8) degree of competition. In this

appraisal, we applied a risk premium of 0.5% to

reflect geographic concentration risk of the Subject

Company.

* Morningstar Inc. SBBI Yearbook is based on the original seminal study of Professor Roger Ibbotson and Rex Sinqufield, analyzing the long term returns of the principal asset classes in the United States economy. It provided the study on long term returns of the principal asset classes for over 25 years.

SBBI yearbook 2014 classified public listed companies into 10 deciles based on their market

capitalizations. The discounted present value of free cash flow indicates the Fundamental Value of

Xiyi Expressway Co. to be RMB2,440 million. By comparing the Fundamental Value to market

capitalizations of Hong Kong listed companies, it was determined that Xiyi Expressway Co. should

fall into 4th decile.

As such, our analysis concludes that a discount rate of 10% is considered appropriate for valuing Xiyi

Expressway Co..

ADDITIONAL VALUATION CONSIDERATIONS

Adjustment of Tax Shield on Interest Expenses Attributable to the Loan Outstanding

Under the APV method, as the discount rate used was at all-equity financing level, an adjustment

was made by addition of the present value of tax shield arising from the interest expenses on the

outstanding loan balances of Xiyi Expressway Co. during the projection period. The discount rate used

for calculation of the present value of the tax shield was the after-tax cost of debt of 4.91%, which

was based on the latest long term loan benchmark rate announced by People’s Bank of China at 6.55%

and the standard tax rate of 25%.

— 443 —


Cash

Based on financial statement provided by the Management, as of the Valuation Date, Xiyi Expressway

Co. had cash balance of RMB46 million.

Discount for Lack of Marketability (“DLOM”)

The concept of marketability deals with the liquidity of an ownership interest, that is, how quickly

and easily it can be converted to cash if the owner chooses to sell. The lack of marketability discount

reflects the fact that there is no ready market for shares in a closely held corporation. Ownership

interests in closely held companies are typically not readily marketable compared to similar interests

in public companies. Therefore, a share of stock in a privately held company is usually worth less than

an otherwise comparable share in a publicly held company.

In the Valuation, option-pricing method was used as the primary method to estimate the DLOM.

Valuation alternative available in determining the DLOM include restricted share studies and

differential in P/E multiples in acquiring public and privately held companies. In this transaction, we

considered option pricing method as more appropriate because (1) put option pricing model explicitly

takes into account of volatility factor of guideline companies and better reflects the impact of industry

conditions on liquidity of Project Company’s equity interest; and (2) put option pricing model reflects

the leading time to liquidity event of the Project Company (i.e. estimated time for completion of this

transaction).

In the Valuation, option-pricing method was used as the primary method to estimate the DLOM. Under

option-pricing method, the cost of put option, which can hedge the price change before the privately

held shares can be sold, was considered as a basis to determine the lack of marketability discount. The

cost of put option was determined by Black Scholes option pricing with consideration of the estimated

time required to sell the subject company’s shares and volatility of the company’s share during that

period. Generally speaking, the farther the valuation date is from an expected liquidity event, the

higher the put option value and thus the higher the implied DLOM. The DLOM derived from option-

pricing method was 5%.

— 444 —


DLOM Valuation – Black-scholes model

The Dividend Adjusted Black-Scholes Option Pricing Model was used in the estimation of Xiyi

Expressway Co.’s DLOM. Following is the formula of Dividend Adjusted BS-Model:

Value of put option= K* (e-rt)* N(-d2) – S*(e-yt)* N(-d

1)

Where

d1

= [ln(S/K)+(r-y+0.5*σ2)*t ] ╱(σ*√t)

d2

= d1 - *√t

S = Fair market value per share as of valuation date

K = Exercise price

T = Expected time to exercise (years)

R = Risk free interest rate

σ = Standard derivation in the value of the underlying stock

Y = Dividend yield of the underlying stock

Valuation Assumptions for Black-Scholes model

In calculating the DLOM, the following major assumptions were adopted:

(i) Fair market value per share as of valuation date and Exercise Price

Assumed that the fair market value per share and the exercise price is equal as 1.00. In applying

option pricing method, it is common to assume the base value of the underlying equity interest

to be $1. The estimated value of put option, relative to $1 base value of underlying equity

interest, shall represent an applicable DLOM to be applied on the estimated equity interest of

Project Company.

(ii) Expected time to exercise (years)

The expected time to exercise is assumed to be 0.5 years, which is the estimated time span for

completion of the Acquistion.

(iii) Risk Free Interest Rate

Risk free interest rate is estimated based on the market yield of China International Government

Bond with maturity closer to the expected time to exercise as of the Valuation Date, i.e. 2.581%.

— 445 —


(iv) Dividend Yield

Per discussion with the Management, dividend yield is estimated as 0%.

(v) Volatility

Expected volatility is estimated as 23% based on average historical volatility of comparable

companies for the period of time close to the expected time to exercise. The comparable

companies are: Zhejiang Expressway Co., Ltd., Sichuan Expressway Co. Ltd., Hopewell

Highway Infrastructure Ltd., Anhui Expressway Co. Ltd., Shenzhen Expressway Co. Ltd. and

Jiangsu Expressway Co. Ltd.

Sensitivity Analysis

As part of the Valuation, sensitivity analysis of value was performed. We tested sensitivity of the

value by changing the following parameters:

• discount rates;

• revenue growth;

• DLOM

Table below shows sensitivity analysis on the fair market value of equity interest of Xiyi Expressway

Co. (in RMB’000) was made by varying the discount rate with revenue assumptions under the Base

Case, 10% above the revenue of Base Case in each of projection period (“Base Case +10%”) and

10% below the revenue of Base Case in each of projection period (“Base Case -10%”), respectively.

RMB’000

Discount Rate

Revenue 9.0% 10.0% 11.0% 12.0% 13.0%

Base Case + 10% 1,093,000 923,000 769,000 630,000 502,000

Base Case 821,000 669,000 529,000 405,000 290,000

Base Case - 10% 551,000 415,000 292,000 181,000 79,000

— 446 —


Table below shows sensitivity analysis on the fair market value of equity interest of Xiyi Expressway

Co. (in RMB’000) was made by varying the DLOM:

DLOM 0% 5% 10%

Fair market value of equity interest

of Xiyi Expressway Co. 704,000 669,000 634,000

Conclusion of Value

Based upon the investigation and analysis outlined above, it is our opinion that the fair market value

of 100% equity interest in the business enterprise of Jiangsu Xiyi Expressway Co., Ltd as of the

Valuation Date is reasonably stated as RENMINBI SIX HUNDRED AND SIXTY NINE MILLION

(RMB669,000,000).

This conclusion of value is based on generally accepted valuation procedures and practices that rely

extensively on the use of numerous assumptions and the consideration of many uncertainties, not all of

which can be easily quantified or ascertained.

We do not provide assurance on the achievability of any financial results estimated by the Management

because events and circumstances frequently do not occur as expected; differences between actual and

expected results may be material; and achievement of the forecasted results is dependent on actions,

plans, and assumptions of Management.

We have not investigated the title to or any liabilities against the property appraised.

We hereby certify that we have neither present nor prospective interests, direct or indirect, in the

Company, Xiyi Expressway Co. and/or the other investments of Xiyi Expressway Co. or the value

reported.

Respectfully submitted,


AMERICAN APPRAISAL CHINA LIMITED

Kevin Leung

Vice President and Director

Note: Mr. Kevin Leung has been involved in business valuation for the purpose of joint venture, merger and acquisition and public listing for over 11 years. Mr. Leung has prior experience in conducting equity interest valuation to Hong Kong listed China based toll road companies. He is a fellow member of the Association of Chartered Certified Accountants and charter holder of the Chartered Financial Analyst.

This valuation was prepared under the supervision of Mr. Leung as project-in-charge with significant professional assistance from Ms Tracy Chow and Mr. Dan Pu.

— 447 —


II. The following is the text of a report from Deloitte Touche Tohmatsu Certified Public

Accountants LLP, the reporting accountants, prepared for the purpose of incorporation in this

circular, confirming the valuation of Xiyi Company.



ACCOUNTANTS’ REPORT ON CALCULATIONS OF DISCOUNTED FUTURE

ESTIMATED CASH FLOW IN CONNECTION WITH VALUATION OF EQUITY

INTEREST OF JIANGSU XIYI EXPRESSWAY COMPANY LIMITED


We have examined the calculations of the discounted future estimated cash flows on which

the valuation prepared by American Appraisal China Limited dated 23 January 2015, of a

100% equity interest in Jiangsu Xiyi Expressway Company Limited (“Xiyi Company”) as

at 30 September 2014 (the “Valuation”) is based. Xiyi Company is a company established

in Jiangsu whose principal activities are construction and operation of toll road with Jiangsu

Province, the People’s Republic of China (the “PRC”). The Valuation based on the discounted

future estimated cash flows are regarded as a profit forecast under Rule 14.61 of the Rules

Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing

Rules”) and will be included in a circular dated 23 January 2015 issued by Jiangsu Expressway

Company Limited (the “Company”) in connection with the acquisition of 100% equity interest

in Xiyi Company (the “Circular”).

DIRECTORS’ RESPONSIBILITY FOR THE DISCOUNTED FUTURE ESTIMATED

CASH FLOWS

The directors of the Company are responsible for the preparation of the discounted future

estimated cash flows in accordance with the bases and assumptions determined by the directors

and set out in the section headed “The general principle and method for determining price in

affiliated transaction/connected and major transaction” of the Circular (the “Assumptions”).

This responsibility includes carrying out appropriate procedures relevant to the preparation of

the discounted future estimated cash flows and applying an appropriate basis of preparation; and

making estimates that are reasonable in the circumstances.

— 448 —


REPORTING ACCOUNTANTS’ RESPONSIBILITY

It is our responsibility to form an opinion on the arithmetical accuracy of the calculations of the

discounted future estimated cash flows on which the Valuation is based and to report solely to

you, as a body, as required by Rule 14.62(2) of the Listing Rules, and for no other purpose. We

do not assume responsibility towards or accept liability to any other person for the contents of

this report.

Our engagement was conducted in accordance with Hong Kong Standard on Assurance

Engagements 3000 “Assurance Engagements Other Than Audits or Reviews of Historical

Financial Information” issued by the Hong Kong Institute of Certified Public Accountants. This

standard requires that we comply with ethical requirements and plan and perform the assurance

engagement to obtain reasonable assurance on whether the discounted future estimated cash

flows, so far as the calculations are concerned, have been properly compiled in accordance with

the Assumptions. Our work does not constitute any valuation of Xiyi Company.

Because the Valuation relates to discounted future estimated cash flows, no accounting policies

of the Company have been adopted in its preparation. The Assumptions include hypothetical

assumptions about future events and management actions which cannot be confirmed and

verified in the same way as past results and these may or may not occur. Even if the events and

actions anticipated do occur, actual results are still likely to be different from the Valuation and

the variation may be material. Accordingly, we have not reviewed, considered or conducted any

work on the reasonableness and the validity of the Assumptions and do not express any opinion

whatsoever thereon.

OPINION

Based on the foregoing, in our opinion, the discounted future estimated cash flows, so far as the

calculations are concerned, have been properly compiled, in all material respects, in accordance

with the Assumptions.


Shanghai, China

23 January 2015

— 449 —


III. The following is the text of a letter from the Board in connection with the profit forecast

included in the valuation report set out in part I of Appendix IVB of this circular prepared for

the purpose of incorporation in this circular.



23 January 2015


Dear Sir or Madam,

CONFIRMATION FROM THE BOARD IN RESPECT OF THE PROFIT FORECAST

Reference is made to the Company’s announcement dated 31 December 2014 and the circular

of the Company dated 23 January 2015) (the “Circular”) in respect of the connected and major

transaction. Capitalised terms defined in the Circular shall have the same meanings when used

in this letter, unless the context otherwise requires.

As disclosed in the section headed “the general principle and method for determining price in

affiliated transaction / connected and major transaction” of the Circular, the valuation report set

out in Part I of Appendix IVB of the Circular contained valuation in respect of Xiyi Company

which was arrived at using the income approach, hence such valuation shall be regarded as a

profit forecast pursuant to Rule 14.61 of the Hong Kong Listing Rules.

— 450 —


Since Xiyi Company shall merge into a subsidiary of the Company following completion

of the Transactions and that no financial adviser has been appointed in connection with the

Transactions, we hereby confirm, pursuant to Rule 14.62 of the Hong Kong Rules, that the

profit forecasts contained in the Circular have been made by the Board after due and careful

enquiry.

Yours faithfully,



The Board of Directors

— 451 —

APPENDIX VA TRAFFIC CONSULTANT’S REPORT IN RESPECT OF NINGCHANG ZHENLI

The following is the full text of the traffic consultant’s report prepared by Jiangsu Weixin in respect of

Ningchang Zhenli for the purpose of incorporation in this Circular.

10 December 2014

The Directors


6 Xianlin Avenue, Qixia District

Nanjing, Jiangsu

The PRC

Dear Sirs:

JIANGSU NINGCHANG EXPRESSWAY, ZHENLI EXPRESSWAY TRAFFIC VOLUME,

TOLL REVENUE, OPERATION AND MAINTENANCE COSTS ESTIMATION

Jiangsu Weixin Engineering Consultant Limited Company, was appointed by Jiangsu Expressway

Company Limited and Jiangsu Ningchang-zhenli Expressway Company Limited to carry out an

estimation of traffic volume, toll revenue, operation and maintenance costs for Ningchang Expressway

and Zhenli Expressway.

The prediction of the final report has been adopted all reasonable and professional skills, cautiously

and carefully prepared. The research results are summarized as follows.

1. INTRODUCTION

The basic situations of Ningchang Expressway and Zhenli Expressway are shown in the Table 1.

Table 1 Basic Situation of the Study Roads

Road Name Study Section Mileage No. of Lanes Remarks (km)

Ningchang Expressway

Changzhou South Interchange – Guizhuang Junction

87.26 Dual 3 lanes Open to traffic in 2007

Zhenli Expressway Dantu Junction – Qianma Junction 65.66 Dual 3 lanes Open to traffic in 2007

— 452 —


2. MAIN SCOPE OF SERVICE

The main scope of the service provided comprised of:

(1) Gathering and arranging traffic volume in the study area, analyzing them by vehicle

type from the road cross section, interchange and main toll station, learn about the

development situation of transportation over the years.

(2) Collecting current and historical social-economic data to assist in understanding historical

trends and predicting likely future trends in the study area.

(3) Gathering the latest OD (Origin and Destination) investigation data and traffic volume

data of different vehicle type in the study area, at the same time analysis the toll data of

expressway network in the project, so as to understand the traffic condition of the region

and the roads studied.

(4) Developing the traffic forecasting model for the study area, analysising the related

relationship between traffic volume and development of social economy, and using the

latest traffic data to test the model.

(5) From 2013 onward, making a prediction about traffic volume and toll revenue of the

roads researched in assignment year. Toll revenue prediction is based on the current

charging standard and related policies.

(6) Using “linear interpolation” approach to calculate the traffic volume and the toll revenue

of middle year within the predicting period, so as to get annual average daily traffic

volume and annual average toll revenue in forecast period of the roads in the project.

(7) According to the forecast of traffic volume, combining with cost growth rule to predict

the operation and maintenance costs in future years.

(8) Submitting a forecast report on independent traffic volume and toll revenue, operation and

maintenance costs forecast report, including the forecast methodology and the assumption

factors applied, as decision-making reference for the Company.

— 453 —


3. TRAFFIC FORECAST METHODOLOGY

The traffic forecast methodology for this study is an international recognized prediction

methodology which has been used in other toll highway in China. The traffic forecast

methodology consists of the following stages:

(1) Review of future year economic growth rates;

(2) Elasticity analysis to determine the traffic growth rates for the forecast period;

(3) Calculation of future PA (production and attraction) value and OD (Origin and

Destination) matrix, for assignment years 2014, 2015, 2016, 2017, 2018, 2019, 2020,

2021, 2024, 2025, 2030 and 2032;

(4) Definition of road networks data for the assignment years 2014, 2015, 2016, 2017, 2018,

2019, 2020, 2021, 2024, 2025, 2030 and 2032;

(5) Forecasting the compositions of vehicles subject to doll by vehicle type in the prediction

period;

(6) Assignment of traffic volume to the future road network for each assignment year based

on future year forecasting parameters;

(7) Assuming the charging policy and standard within the predicting period;

(8) Forecasting toll revenue, operation and maintenance costs.

— 454 —


4. MAJOR MODEL ASSUMPTIONS

The major assumptions adopted in the traffic forecast model are comprised of the followings:

(1) Economic Growth Rate

The economy development of South Jiangsu will maintain stable but slowing growth. The

growth trend of the economic and social index also should comply with this trend.

Combining with the predicting results of Jiangsu further economic development provided

by Jiangsu Information Center, we forecast the economic and social indexs for assignment

years 2015, 2020, 2025 and 2030. The future GDP growth rate of South Jiangsu is shown

as below:

Table 2 Internal District Annual GDP Growth Forecast in the Future Years

District 2014–2015 2016–2020 2021–2025 2026–2032

Nanjing 10.0% 9.0% 8.0% 6.5%

Wuxi 8.3% 7.5% 6.2% 4.7%

Changzhou 10.0% 9.0% 7.9% 6.5%

Suzhou 8.5% 7.8% 6.4% 4.9%

Zhenjiang 11.0% 10.0% 8.0% 6.0%

In 2013, the GDP growth rate in Shanghai was 8.0%, the GDP growth rate in Zhejiang

and its south was 8.5%.The GDP growth rate of Mid-Jiangsu and North Jiangsu and its

north was 9.5%, while in Anhui and its west the GDP growth rate was 10%. The GDP

growth rate of future years is predicted as blow:

Table 3 External District Annual GDP Growth Forecast in the Future Years

District 2014–2015 2016–2020 2021–2025 2026–2032

Shanghai 7.0% 6.0% 5.0% 4.0%

Zhejiang and its South 8.5% 7.5% 6.4% 4.8%

North Yangtze River 9.0% 7.8% 6.5% 5.0%

Anhui and its West 9.0% 8.0% 7.0% 5.5%

— 455 —


(2) Elasticity Indices

The elasticity indices relating the traffic growth to the economic growth are the basis

of forecasting the future year traffic flow. After analyzing the relationship between the

historical traffic and economic development, we can calculate the elasticity indices of

passenger and goods vehicles in the past years. According to the historical elasticity

indices, with reference to the relevant research, we finalize the elasticity indices of

passenger and goods vehicles in different regions within the predicting period shown as

below:

Table 4 Future Elasticity Indices of Goods Vehicles

Year (elasticity indices

of passenger vehicles) South Jiangsu Mid-Jiangsu North Jiangsu

Shanghai/

Zhejiang

2012–2015 0.588 0.650 0.645 0.588

2016–2020 0.493 0.556 0.559 0.493

2021–2025 0.447 0.493 0.504 0.447

2026–2030 0.374 0.448 0.468 0.374

2031–2035 0.331 0.405 0.424 0.331


Year (elasticity indices

of passenger vehicles) South Jiangsu Mid-Jiangsu North Jiangsu

Shanghai/

Zhejiang

2012–2015 0.497 0.472 0.467 0.497

2016–2020 0.419 0.401 0.398 0.419

2021–2025 0.352 0.339 0.337 0.352

2026–2030 0.301 0.293 0.302 0.301

2031–2035 0.263 0.271 0.271 0.263

— 456 —


Referring to the analysis of future elasticity indices from Jiangsu Expressway Network

and other important transport infrastructure planning, combing the economic and social

development stages, predictions are made that the Historical Elasticity Indices of

Passenger Vehicles of Shanghai, Zhejiang and other core districts of Yangtze River are

the same as South Jiangsu. The Historical Elasticity Indices of Passenger Vehicles of

Anhui and its west are the same as North Jiangsu. The Historical Elasticity Indices of

Passenger Vehicles of North Yangtze River are as the same as the Mid-Jiangsu.

(3) Traffic Growth Rate

According to the calculation formulas of traffic growth rate, combining the future

elasticity indices of passenger/goods vehicles and the future economic growth rate to

calculate the traffic growth rate of passenger/goods vehicles, the specific results see the

tables below.

Table 6 Future Traffic Growth Rate of Passenger Vehicles

Year (passenger

vehicle traffic

growth rate) South Jiangsu

Mid-Jiangsu

and North

Jiangsu and

its north

Anhui and

its west

Shanghai/

Zhejiang and

its south

2014–2015 5.6% 5.9% 5.8% 4.1%

2016–2020 4.3% 4.3% 4.5% 3.0%

2021–2025 3.3% 3.2% 3.5% 2.2%

2026–2032 2.1% 2.2% 2.6% 1.5%

Table 7 Future Traffic Growth Rate of Goods Vehicles

Year (passenger

vehicle traffic


Mid-Jiangsu

and North

Jiangsu and

its north

Anhui and

its west

Shanghai/

Zhejiang and

its south

2014–2015 4.8% 4.2% 4.2% 3.5%

2016–2020 3.6% 3.1% 3.2% 2.5%

2021–2025 2.6% 2.2% 2.4% 1.8%

2026–2032 1.7% 1.5% 1.7% 1.2%

Weighted the passenger and goods vehicles, the average growth rate of the total traffic

volume is shown as below.

— 457 —


Table 8 Future Traffic Growth Rate of Vehicles

Year (passenger

vehicle traffic


Mid-Jiangsu

and North

Jiangsu and

its north

Anhui and

its west

Shanghai/

Zhejiang and

its south

2014–2015 5.4% 5.4% 5.3% 3.9%

2016–2020 4.1% 4.54% 4.1% 2.8%

2021–2025 3.1% 3.68% 3.2% 2.1%

2026–2032 2.0% 2.82% 2.3% 1.4%

(4) Road Network Information

This prediction collected the latest expressway network and railway planning information

and the arterial highway planning information, which was recorded in road network model

of assignment years. The main road network’s development and planning information is

shown as below.

Table 9 Main Road Network Planning Information of Assignment Year

Number Road Name

Expected

Construction

Time limit

Expected

Opening Time

1 Gaochun — Wuhu Expressway 2012–2014 2015

2 Liyang — Changzhou Expressway 2010–2015 2016

3 Gaochun — Liyang Expressway 2014–2016 2017

4 Tianchang — Yangzhou expressway 2014–2017 2018

5 Yixing — Hangzhou Expressway 2015–2017 2018

6 Liyang — Guangde Expressway 2014–2017 2018

7 Xitong Bridge 2014–2017 2018

8 Changzhou — Yixing Expressway 2015–2018 2019

9 Wufengshan Cross River Channel 2015–2020 2021

10 South Suxichang expressway Unknown 2025

11 Yanjiang Intercity Railway

(Nanjing — Changzhou)

Unknown 2030

— 458 —


(5) Vehicle Type Proportion

According to the historical and future developing trend of the vehicle type proportion

and related research results, we make a reasonable forecast about the composition of

passenger and goods vehicles. Specific results see Table 9 and Table 10.

Table 10 Passenger/Goods Vehicles Proportion Prediction on Ningchang Expressway

Year P1 P2 P3 P4 G 1 G2 G3 G4 G5 Total

2010 67.4% 1.8% 1.5% 3.1% 5.1% 9.2% 3.1% 6.2% 2.5% 100%

2011 68.3% 1.3% 1.4% 2.0% 5.3% 9.3% 2.9% 6.6% 2.8% 100%

2012 71.1% 1.1% 1.3% 2.0% 5.0% 8.4% 2.5% 5.7% 2.8% 100%

2013 68.5% 0.8% 0.9% 2.1% 5.3% 9.5% 2.8% 6.8% 3.3% 100%

2015 65.6% 0.7% 0.9% 3.9% 4.2% 8.0% 3.6% 5.4% 7.8% 100%

2020 71.0% 0.4% 0.7% 3.7% 2.9% 6.7% 3.0% 4.7% 6.9% 100%

2025 74.2% 0.3% 0.6% 3.6% 2.1% 5.9% 2.6% 4.3% 6.4% 100%

2032 78.4% 0.2% 0.5% 1.8% 1.5% 5.3% 2.3% 4.0% 6.0% 100%

Table 11 Passenger/Goods Vehicles Proportion Prediction on Zhenli Expressway

Year P 1 P2 P3 P4 G1 G2 G3 G4 G5 Total

2010 44.3% 0.9% 1.7% 0.4% 3.4% 4.8% 3.2% 16.6% 24.8% 100%

2011 46.6% 0.8% 1.6% 0.3% 3.6% 5.2% 2.9% 13.8% 25.0% 100%

2012 51.5% 0.7% 1.6% 0.6% 3.9% 5.5% 3.0% 8.4% 24.7% 100%

2013 52.5% 0.6% 1.1% 0.9% 4.1% 6.0% 2.8% 7.5% 24.4% 100%

2015 57.2% 0.6% 1.0% 1.0% 3.8% 5.3% 2.6% 6.7% 21.8% 100%

2020 61.2% 0.5% 0.8% 0.8% 3.2% 4.5% 2.4% 5.8% 20.8% 100%

2025 65.2% 0.4% 0.6% 0.7% 2.6% 3.8% 2.1% 4.9% 19.9% 100%

2032 70.7% 0.2% 0.4% 0.4% 1.8% 2.7% 1.8% 3.5% 18.6% 100%

— 459 —


(6) Toll Standards

The prediction of the study on the toll revenue in future years is based on the current toll

standards, the adjustment of toll standards caused by inflation factors is not within the

scope of this prediction, so we don’t take it into consideration.

The passenger vehicle is charged by the type and the goods vehicle is charged by the

weight on expressways of Jiangsu, detailed toll standards are shown as follows:

Table 12 Vehicle Type Classification and Toll Standards on Expressway of Jiangsu

Vehicle type

Classification standard

Charge

coefficient

Toll rate

(RMB/km)

Minimum

charge

(RMB)

Passenger

vehicle Goods vehicle

Type1≤7seats 1 0.45 5

≤2tons 1.5 0.675 15

Type2

8seats–19seats 1.5 0.675 10

2tons–5tons

(including 5tons)

2 0.90 20

Type3

20seats–39seats 2 0.90 10

5tons–10tons

(including 10tons)

2.5 1.125 20

Type4

≥40seats 2 0.90 10

10–15tons (including

15tons) 20 foots

container car

3 1.35 30

Type5 >15tons 40 foots

container car

3.5 1.575 30

— 460 —


Table 13 Expressway Toll Standards of Goods Vehicle by Weight (No Overloading

Vehicles)

Category

Total vehicle Axle

load <10tons

10tons≤Total vehicle

Axle load≤40tons

Total vehicle Axle

load >40tonsLess than 2.5 yuan is

canceled, among

2.51–7.50RMB

counted as 5, among

7.51–9.99 count

as10RMB.

Expressway charging standards for

weight:

1. The basic rate is 0.09 RMB/ton

per km

2. less than 5 tons counted as 5 tons

3. Less than 20 RMB, counted as

20 RMB

0.09RMB /ton Per km 0.09RMB/ton per km

Linear decline to

0.05RMB/ton per km

0.05RMB/ton per km

Table 14 Expressway Toll Standard of Overloaded Goods Vehicle

1. Normal quality

and overrun

30%(including 30%)

2. Overrun 30%–50%

(including the vehicle

overrun 50%)

3. Overrun 50%–100%


overrun 100%)

4. the vehicle overrun

more than 100%

When the quality of the

vehicle and goods

overrun the total quality

limit and the total axle

limit at the same time,

we always choose the

bigger limit

Use basic rate to charge

temporarily

Normal quality and the 30% overrun part use basic charging rate to charge

The rest part use 2 times of

the basic rate to charge





From the time 12 P.M. on February 28, 2009, new overloaded goods vehicle charge

standard by weight has been implemented:

1. The 30% overrun part (including 30%), charged as 0.09 RMB per ton per km;

2. The 30%−100% overrun part (including 100%), charged 3–6times of 0.09 RMB per

ton per km;

3. The 100% overrun part, charged 6 times of 0.09 RMB per ton per km;

In addition to the adjustment of overloaded vehicle’s toll standard, other administration of

charge still in accordance with the original regulations.

— 461 —


(7) Forecast Methodology of Toll Revenue

• Forecast Methodology of Passenger Vehicle Toll Revenue

According to the expressway toll methods and standards, the passenger vehicles

are tolled by vehicle type and mileages. Therefore, the annual average daily

traffic (AADT) converted by the forecast future year traffic of all vehicle types, is

multiplied by the road kilometers and toll rate (RMB per Km) of all vehicle types,

and then the toll revenue of each vehicle type (Ap) can be obtained.

But there exists an error between the actual toll revenue of passenger vehicles

and that calculated by the above-mentioned methods, because of the expressway

“Minimum Charge” policy and the calculation principle that the value under

RMB2.50 is rounded off, that from RMB2.51 to RMB7.50 is rounded up to

RMB5.00, and that from RMB7.51 to RMB10.00 is rounded up to RMB10.00.

From the view of the accumulation of long-term and massive samples, the error

can be deemed as the system error. There is a steady proportion between the

actual revenue Bp and the revenue Ap calculated by model and mileage. The Cp

is a coefficient between Bp and Ap. Therefore, the final toll revenue of passenger

vehicle is Ap × Cp.

• Forecast Methodology of Goods Vehicle Toll Revenue

The goods vehicle is charged by weight. The toll revenue of each goods vehicle

can’t be calculated directly because the toll of each goods vehicle relates to the

total mass of the freight and the vehicle itself. Before the implementation of weight

toll, the goods vehicle is charged in the same way as the passenger vehicle, by

type and mileages. The purpose of the weight toll is to prevent the phenomenon of

goods overload but not to raise the toll level. Therefore, the weight-toll standard

is made to keep basically the same as toll revenue calculated by type and mileages

(or trip) on the conditions that the vehicle is not overloaded. That means the goods

vehicle toll revenue Ag can also be obtained from calculation by type and mileages

(or trip).

— 462 —


Similarly because of the rounding, minimum charges, monthly-ticket vehicles,

surcharges, etc., there exists an error between Ag and the actual goods vehicle toll

revenue Bg. This error is not a stable value and mainly affected by the overload

status. The coefficient Cg between Bg and Ag can also be got from the actual toll

revenue and traffic data of previous years. The data of previous years show that

the phenomenon of overload has been effectively controlled as the weight-toll

policy has been implemented for a long time in Jiangsu Province (the percentage

of overloaded goods vehicles over all goods vehicles has been controlled under

5% during the “11th Five Years Plan” and expected to be lower than 2% during

the “12th Five Years Plan”). The toll revenue of single goods vehicle has a stable

trend and the coefficient Cg is also stable. Therefore, the toll revenue of goods

vehicle in future years can be amended by Cg’ obtained from past data. Taking into

account the goods vehicle loading rates will have a certain level of growth, which

will result in the truck correction factor have a certain rise, that is, the toll revenue

of future years goods vehicle is Ag × Cg’, in consideration of that Cg’ is expected

to increase as a result of increase of loading rates of goods vehicles.

(8) Forecast Methodology of Operation and Maintenance Costs

• Forecast Methodology of Operation Costs

Operation costs include payment of employees and administrative costs.

Payment of employees employee costs includes wages and surcharges, employee

benefits, housing fund, labor insurance and other expenses. According to analyzing

historical development trend of payment of employees of Ningchang-zhenli

Company, and combining with The Twelfth Five-Year Plan for National Economic

and Social Development of the People’s Republic of China and Jiangsu Province

on the development goals of per capita income, and taking into account the profit

of the Expressway Company, consultant believes that the payment of employees

will grow continually, but the growth rate will decrease year by year from 7%

before 2020 to 3% finally.

Administrative costs mainly include travel expenses, office expenses, utility

expenses, vehicle use fees, communication expenses, promotional expenses,

entertainment expenses, etc. This part of the cost is stable in the statistics of

Ningchang-zhenli Company. In this prediction, Consultant takes 2% as the annual

growth rate.

— 463 —


• Forecast Methodology of Maintenance Costs

According to “Jiangsu Expressway Maintenance and Management Measures”, the

maintenance costs includes routine maintenance and medium & major overhaul.

Routine maintenance means preventive maintenance to the expressways facilities

and repair to the their affiliated facilities in order to keep them in good condition,

such as road cleaning, separator cleaning, shoulder refurbishment, slope dredging,

drainage facilities dredging, typical pumping, small pavement disease treatment,

bridge expansion joints cleaning, sign cleaning, guardrail cleaning, partial

maintenance, etc. According to the daily maintenance costs that have occurred since

open to traffic, the allocation of costs are 40% to transportation-related projects

and 60% to non-transportation projects. It is expected that 40% of the maintenance

costs used in transportation projects such as small pavement hazards maintenance

will increase with the growth of traffic, but 60% of the maintenance costs used in

non-transportation projects such as regular cleaning will remain unchanged.

Medium & major overhaul mainly refers to works to be conducted in order to fully

restore the expressways to satisfy original design standards by way of long-term

comprehensive repair of material damage on the expressways and their facilities, or

refers to partial improvement and separate construction of additional works within

the original level in order to increase the expressway’s capacity gradually. For

example, completely renovating the road which reaches the service life to restore

its original design condition, or timely repairing the major damage caused by

floods, earthquakes, and so on, to ensure its normal use.

— 464 —


The outline of the expressway maintenance and management development in

“Twelfth Five-Year” Plan issued by the Ministry of Communications points out

that, we must increase preventive maintenance efforts, and establish the ideal

of total life-cycle maintenance costs, formulate preventive maintenance guide

policies and technical standards which are suitable for China’s national conditions,

explore the formation of a series of preventive maintenance techniques, set aside

a certain percentage of special funds for the fully implementing of the preventive

maintenance. On the foundation of routine maintenance, we increase expressway

maintenance funding and organize the road medium & major overhaul project

to maintain road infrastructure in good technical conditions and ensure the road

network’s capacity and service level. According to the spirit of this outline, we

should strengthen the routine preventive maintenance to reduce the medium &

major overhaul. Therefore, this forecast will be sized to preventive maintenance

repair a partial substitute, to the medium & major overhaul, some medium & major

overhaul costs will be in the form of preventive maintenance costs which are

assessed annually.

“Jiangsu Expressway Maintenance and Management Measures Highway

Maintenance Management Methods of Jiangsu Province” points out that

“Expressways should be patrolled everyday and regular inspections, periodical

inspections and special inspections should also be conducted; expressway diseases

and problems which are founded in patrol and inspections shall be solved without

delay”. Complying to this principle, during the maintenance period of Jiangsu

Expressway, it can get timely maintenance repair from the annual investment of

medium & major overhaul to avoid one-time large-scale restoration project which

could interfere the expressway operation.

Because of the volatility of medium & major overhaul cost, the first three years’

forecasting costs are according to the maintenance project of Ningchang-zhenli

Company and the empirical data. Afterwards, medium & major overhaul costs are

reasonably allocated to each year combining with the growth of traffic volume.

Forecasting the costs are allocated 40% to transportation-related projects and 60%

to non-transportation.

— 465 —


(9) The other Assumption in the Process of Prediction

• The last year of the operating period of each expressway in Jiangsu Province is

inconsistent, if strictly conducting in accordance with the existing toll period, it

may transfer the traffic volume flow to a little far-away but free roads; at the same

time, there is no clear basis for judging future charges policy adjustments. The

project suggests that in perspective, the traffic volume and toll revenue in each

study road is unaffected to the other free expressways.

• As a commodity, the toll charges of expressways should, in principle and based

on general market practice, increase together with the inflation and increase in

operation and management costs. However, since expressways constitute one of

the basic needs of the general public, they are also part of the public construction

projects that could affect livelihood of the general public. Hence the increase in

toll charges would have an adverse effect on social stability, quality of living and

corporate and industrial development. In view of the uncertainty in respect of the

increase in toll charges, from a conservative point of view, it is considered more

likely that the policy of toll rate standard would remain consistent with the present

standard. In view of the above, Jiangsu Weixin Engineering Consultant Limited

Company and the board of directors of Jiangsu Expressway Company Limited

consider such assumption to be fair and reasonable.

• In the future, Jiangsu Expressway Network Operation and Management Center may

seek more accurate assignment methods than the shortest route method to split the

toll revenue of every expressway operating company. The forecast will not consider

this factor which affects the prediction accuracy.

— 466 —


• It usually takes the capacity of designed service level as the upper road traffic

volume. But the traffic volume of some roads has exceeded the capacity of the

secondary service levels on Huning, Sujiahang, Guangjing-Xicheng Expressway

which have higher traffic volume than other places in Jiangsu. Based on the actual

situation, the prediction cancels the restrictions of the secondary service level’s to

section runoff capacity and takes the fourth service level as a strict traffic limit;

meanwhile, considering reaching the secondary service road traffic, road congestion

has a certain restriction to traffic growth by a certain discount of growth rates.

• Income only means the main business income, that is to say the road toll revenue.

According to the “Notice of Explicitly Imposing Standards of Expressway Network

Toll and other Relevant Matters”. ([2014]No.29 Su-Jia-Fu Document), 10% of the

toll revenue of each network expressway (excluding the cross-river channel) is

taken as overall development costs of expressways and general highways, which

is contributed to appointed account of provincial finance monthly and operated by

Jiangsu Transport Department. The policy is tentatively scheduled for 10 years,

ends in 31th of December in 2023. Because of the unclear future policy, the

forecast assumes that the policy will be extended to the end of toll period.

• Operation and maintenance costs refer to Xiyi Company’s operation and

maintenance costs which deducted part of the depreciation costs; meanwhile, the

operation and maintenance costs in 2013 are apportioned by the road mileage of

company’s overall operating costs for the actual costs of each road can not be

accounted from the company’s costs statistics.

• In the relevant projections concerning costs, operational costs and management

costs were considered separately as different aspects of the costs, and the factor of

inflation had already been taken account when assessing the increase in operational

costs and management costs. Hence inflation had not been taken into account in

respect of the assessment of the costs as a whole. In view of the above, Jiangsu

Weixin Engineering Consultant Limited Company and the board of directors of

Jiangsu Expressway Company Limited consider such assumption to be fair and

reasonable.

— 467 —


5. CONCLUSION

(1) Forecast Results Of Traffic Volume and Toll Revenue

According to the assumption and methodology applied in the prediction, we obtained

the result of traffic volume and toll revenue for the Ningchang Expressway, the Zhenli

Expressway in the charging time limit. See the table below.

Table 15 Traffic Volume and Toll Revenue Prediction of Ningchang Expressway

Year

Traffic

volume Growth rate Toll revenue Growth rate Affecting factors

(veh/day)

(10000

RMB/year)

2011(a) 10,727 — 22,342 —

2012(a) 10.969 2.3% 21,568 −3.5%

2013(a) 11,988 9.3% 24,627 14.2%

2014 19,738 65.6% 45,791 85.9% The positive effect of the

opening of Lima

Expressway

2015 23,767 20.4% 54,414 18.8%

2016 26,771 12.6% 60,578 11.3% The negative effect of the

opening of the Changli

Expressway


opening of the Gaochun-

Liyang Expressway

2018 30,340 8.2% 67,304 7.2%

2019 32,812 8.1% 72,173 7.2% The slightly negative

effect of the opening of

the Changyi Expressway

— 468 —


2020 35,039 6.8% 76,478 6.0%

2021 37,192 6.1% 80,610 5.4%

2022 39,233 5.5% 84,488 4.8%

2023 41,167 4.9% 88,131 4.3%

2024 43,071 4.6% 91,708 4.1%

2025 43,874 1.9% 92,948 1.4% The negative effect of

the opening of the

South Channel

2026 45,632 4.0% 96,222 3.5%

2027 47,316 3.7% 99,338 3.2%

2028 49,040 3.6% 102,543 3.2%

2029 50,670 3.3% 105,550 2.9%


opening of the Yanjiang

inter-city railway

2031 53,902 3.1% 109,993 2.6%

2032 55,595 3.1% 84,758 −22.9%

Table 16 Traffic Volume and Toll Revenue Prediction of Zhenli Expressway

Year

Traffic

volume Growth rate Toll revenue Growth rate Affecting factors

(veh/day)

(10000

RMB/year)

2011(a) 7,322 — 19,812 —

2012(a) 7,581 3.5% 18,776 −5.2%

2013(a) 7,861 3.7% 19,170 2.1%

2014 8,782 11.7% 19,674 2.6%

2015 9,481 8.0% 20,997 6.7%


opening of the Changli

Expressway

2017 10,525 7.0% 22,992 6.2%


opening of the Tianchang-

Yangzhou Liyang-

Guangde Expressway

— 469 —


2019 11,864 -2.9% 25,559 -3.6% The negative effect of

the Changyi Expressway

2020 12,125 2.2% 25,938 1.5%

2021 9,897 -18.4% 21,023 -19.0% The positive effect of

the opening of

Wufengshan Channel

2022 10,878 9.9% 22,942 9.1%

2023 11,664 7.2% 24,426 6.5%

2024 12,454 6.8% 25,892 6.0%


opening of South Channel

2026 14,155 4.2% 29,003 3.5%

2027 14,708 3.9% 29,913 3.1%

2028 15,251 3.7% 30,789 2.9%

2029 15,783 3.5% 31,626 2.7%

2030 16,322 3.4% 32,459 2.6%

2031 16,845 3.2% 33,245 2.4%

2032 17,350 3.0% 25,485 -23.3%

Note: 1. The traffic volume for each road in 2013 is the annual average traffic volume of section flow by the Network Center1 in 2013.

2. Income only means the main business income, that is to say the road toll revenue. In this prediction, 10% has been deducted to turn over to the government for road construction.

3. The expense period of Ningchang-Zhenli Expressway ends in September 2032. The real income in the final year of the Project Road has been reduced by the actual months.

1 Jiangsu Expressway Network Operation & Management Centre (“Network Centre”) reorganised in December 2004, is a non-profit organisation established by the Jiangsu Expressway Network Operation & Management Committee, which is held by Communications Holdings and jointly set up by the expressway operation companies in the province. Its main responsibilities involve the monitoring and settlement of revenue income of the Jiangsu expressway network, the collection and issue of public information concerning the expressways within its network and attending to the relevant cooperation and management work. The data from the Network Centre used in the traffic consultant’s report is therefore considered to be reliable.

— 470 —


The tolls revenue prediction results of Ningchang-Zhenli Company are as below:

Table 17 tolls revenue prediction results of Ningchang-Zhenli Company

(Unit: Million)

Year Toll Revenue Year Toll Revenue

2013 43,803 2023 112,557

2014 65,466 2024 117,600

2015 75,412 2025 120,976

2016 82,218 2026 125,225

2017 85,801 2027 129,252

2018 93,823 2028 133,332

2019 97,732 2029 137,175

2020 102,416 2030 139,700

2021 101,633 2031 143,238

2022 107,430 2032 110,243

— 471 —


(2) Forecast Results Of Operation and Maintenance Costs

According to the assumption and methodology of forecast, the forecast results of

operation and maintenance costs of Ningchang and Zhenli Expressway in this project are

shown as below.

Table 18 Forecast Results Of Operation and Maintenance Costs of Ningchang zhenli

Expressway Company (Unit: Million)

Year

Ningchang

Expressway

Zhenli

Expressway Total cost

2013 6,730 4,936 11,666

2014 8,249 5,714 13,964

2015 8,870 6,007 14,876

2016 9,295 6,190 15,485

2017 9,146 6,086 15,232

2018 9,667 6,525 16,192

2019 10,221 6,771 16,992

2020 10,781 7,098 17,879

2021 11,235 7,110 18,345

2022 11,694 7,457 19,151

2023 12,161 7,791 19,952

2024 12,641 8,137 20,778

2025 13,070 8,527 21,597

2026 13,576 8,875 22,451

2027 14,095 9,235 23,330

2028 14,637 9,608 24,245

2029 15,194 9,996 25,190

2030 15,770 10,401 26,172

2031 16,168 10,672 26,841

2032 12,433 8,211 20,644

Yours faithfully


Jiangsu Weixin Engineering Consultant Ltd.

Wangjian

Director

— 472 —

APPENDIX VB TRAFFIC CONSULTANT’S REPORT IN RESPECT OF XIYI COMPANY

The following is the full text of the traffic consultant’s report prepared by Jiangsu Weixin in respect of

Xiyi Company for the purpose of incorporation in this Circular.

10 December 2014

The Directors


6 Xianlin Avenue, Qixia District

Nanjing, Jiangsu

The PRC

Dear Sirs:

JIANGSU XIYI EXPRESSWAY, TAIHU LAKE-RIM EXPRESSWAY,

LUMA ARTERIAL ROAD TRAFFIC VOLUME, TOLL REVENUE,

OPERATION AND MAINTENANCE COSTS ESTIMATION

Jiangsu Weixin Engineering Consultants Limited Company, was appointed by Jiangsu Expressway

Company Limited, Jiangsu Guangjingxicheng Expressway Company Limited and Jiangsu Xiyi

Expressway Company Limited to carry out an estimation of the traffic volume, toll revenue, operation

and maintenance costs of Jiangsu Xiyi Expressway, Taihu Lake-rim and LuMa Arterial Road.

All reasonable and professional skills, care and due diligence has been exercised in preparing the Final

Report. A summary of the findings of this report is set out below:

1. BASIC SITUATION OF THE STUDY ROAD

The basic situation of Xiyi Expressway, LuMa Arterial Road,Taihu Lake-rim Expressway are

shown in the Table 1.

— 473 —


Table 1 Basic Situation of The Study Roads

Road Name Study Section Mileage No. of Lanes Remarks

(km)

Xiyi Expressway North Wuxi Junction

–Yixing Xiwu Junction

69.3 Dual 2 lanes Open to traffic

in 2003

LuMa Arterial Road Luqu Interchange – Mashan 10 Dual 2 lanes Open to traffic

in 2005

Taihu Lake-rim

Expressway

Shuofang Junction

– Nanquan Interchange

20 Dual 3 lanes Open to traffic

in 2006

2. MAIN SCOPE OF SERVICE

The main scope of the service provided comprised of:

(1) Gathering and arranging traffic volume in the study area, analyzing them by vehicle

type from the road cross section, interchange and main toll station, learn about the

development situation of transportation over the years.

(2) Collecting current and historical social-economic data to assist in understanding historical

trends and predicting likely future trends in the study area.

(3) Gathering the latest OD (Origin and Destination) investigation data and traffic volume

data of different vehicle type in the study area, at the same time analysis the toll data of

expressway network in the project, so as to understand the traffic condition of the region

and the roads studied.

(4) Developing the traffic forecasting model for the study area, analyzing the related

relationship between traffic volume and development of social economy, and using the

latest traffic data to test the model.

(5) From 2013 onward, making a prediction about traffic volume and toll revenue of the

roads researched in assignment year. Toll revenue prediction is based on the current

charging standard and related policies.

(6) Using “linear interpolation” approach to calculate the traffic volume and the toll revenue

of middle year within the predicting period, so as to get annual average daily traffic

volume and annual average toll revenue in forecast period of the roads in the project.

— 474 —


(7) According to the forecast of traffic volume, combining with cost growth rule to predict

the operation and maintenance costs in future years.

(8) Submitting a forecast report on independent traffic volume and toll revenue, operation and

maintenance costs forecast report, including the forecast methodology and the assumption

factors applied, as decision-making reference for the Company.

3. TRAFFIC FORECAST METHODOLOGY

The traffic forecast methodology for this study is an international recognized prediction

methodology which has been used in other toll highway in China. The traffic forecast

methodology consists of the following stages:

(1) Review of future year economic growth rates;

(2) Elasticity analysis to determine the traffic growth rates for the forecast period;

(3) Calculation of future PA (production and attraction) value and OD (Origin and

Destination) matrix, for assignment years 2014, 2015, 2016, 2017, 2018, 2019, 2020,

2021, 2024, 2025 and 2031;

(4) Definition of road networks data for the assignment years 2014, 2015, 2016, 2017, 2018,

2019, 2020, 2021, 2024, 2025 and 2031;

(5) Forecasting the compositions of vehicles subject to doll by vehicle type in the prediction

period;

(6) Assignment of traffic volume to the future road network for each assignment year based

on future year forecasting parameters;

(7) Assuming the charging policy and standard within the predicting period;

(8) Forecasting toll revenue, operation and maintenance costs.

— 475 —


4. MAJOR MODEL ASSUMPTIONS

The major assumptions adopted in the traffic forecast model are comprised of the followings:

(1) Economic Growth Rate

The economy development of South Jiangsu will maintain stable but slowing growth. The

growth trend of the economic and social index also should comply with this trend.

Combining with the predicting results of Jiangsu further economic development

provided by Jiangsu Information Center, we forecast the economic and social indexes

for assignment years 2015, 2020, 2025 and 2030. The future GDP growth rate of South

Jiangsu is shown as below:

Table 2 Internal District Annual GDP Growth Forecast in the Future Years

Zone name 2014–2015 2016–2020 2021–2025 2026–2032

Nanjing 10.0% 9.0% 8.0% 6.5%

Wuxi 8.3% 7.5% 6.2% 4.7%

Changzhou 10.0% 9.0% 7.9% 6.5%

Suzhou 8.5% 7.8% 6.4% 4.9%

Zhenjiang 11.0% 10.0% 8.0% 6.0%

In 2013, the GDP growth rate in Shanghai was 8.0%, the GDP growth rate in Zhejiang

and its south was 8.5%.The GDP growth rate of Mid-Jiangsu and North Jiangsu and its

north was 9.5%, while in Anhui and its west the GDP growth rate was 10%. The GDP

growth rate of future years is predicted as blow:

Table 3 External District Annual GDP Growth Forecast in the Future Years

Zone name 2014–2015 2016–2020 2021–2025 2026–2032

Shanghai 7.0% 6.0% 5.0% 4.0%

Zhejiang and its South 8.5% 7.5% 6.4% 4.8%

North Yangtze River 9.0% 7.8% 6.5% 5.0%

Anhui and its West 9.0% 8.0% 7.0% 5.5%

— 476 —


(2) Elasticity Indices

The elasticity indices relating the traffic growth to the economic growth are the basis

of forecasting the future year traffic flow. After analyzing the relationship between the

historical traffic and economic development, we can calculate the elasticity indices of

passenger and goods vehicles in the past years. According to the historical elasticity

indices, with reference to the relevant research, we finalize the elasticity indices of

passenger and goods vehicles in different regions within the predicting period shown as

below:


Year (elasticity

indices of

passenger vehicles)

South

Jiangsu Mid-Jiangsu

North

Jiangsu

Shanghai/

Zhejiang

2012–2015 0.588 0.650 0.645 0.588

2016–2020 0.493 0.556 0.559 0.493

2021–2025 0.447 0.493 0.504 0.447

2026–2030 0.374 0.448 0.468 0.374

2031–2035 0.331 0.405 0.424 0.331


Year (elasticity

indices of

passenger vehicles)

South

Jiangsu Mid-Jiangsu

North

Jiangsu

Shanghai/

Zhejiang

2012–2015 0.497 0.472 0.467 0.497

2016–2020 0.419 0.401 0.398 0.419

2021–2025 0.352 0.339 0.337 0.352

2026–2030 0.301 0.293 0.302 0.301

2031–2035 0.263 0.271 0.271 0.263

— 477 —


(3) Traffic Growth Rate

According to the calculation formulas of traffic growth rate, combining the future

elasticity indices of passenger/goods vehicles and the future economic growth rate to

calculate the traffic growth rate of passenger/goods vehicles, the specific results see the

tables below.

Table 6 Future Traffic Growth Rate of Passenger Vehicles

Year (passenger

vehicle traffic


Mid-Jiangsu

and North

Jiangsu and

its north

Anhui and

its west

Shanghai/

Zhejiang and

its south

2014–2015 5.6% 5.9% 5.8% 4.1%

2016–2020 4.3% 4.3% 4.5% 3.0%

2021–2025 3.3% 3.2% 3.5% 2.2%

2026–2032 2.1% 2.2% 2.6% 1.5%

Table 7 Future Traffic Growth Rate of Goods Vehicles

Year (goods

vehicle traffic


Mid-Jiangsu

and North

Jiangsu and

its north

Anhui and

its west

Shanghai/

Zhejiang and

its south

2014–2015 4.8% 4.2% 4.2% 3.5%

2016–2020 3.6% 3.1% 3.2% 2.5%

2021–2025 2.6% 2.2% 2.4% 1.8%

2026–2032 1.7% 1.5% 1.7% 1.2%

Weighted the passenger and goods vehicles, the average growth rate of the total traffic

volume is shown as below.

— 478 —


Table 8 Future Traffic Growth Rate of Vehicles

Year (total

traffic volume)

South

Jiangsu

Mid-Jiangsu

and North

Jiangsu and

its north

Anhui and

its west

Shanghai/

Zhejiang and

its south

2014–2015 5.4% 5.4% 5.3% 3.9%

2016–2020 4.1% 4.54% 4.1% 2.8%

2021–2025 3.1% 3.68% 3.2% 2.1%

2026–2032 2.0% 2.82% 2.3% 1.4%

(4) Road Network Information

This prediction collected the latest expressway network and railway planning information

and the arterial highway planning information, which was recorded in road network model

of assignment years. The main road network’s development and planning information is

shown as below.

Table 9 Main Road network Planning Information of Assignment Year

Number Project name

Construction

time limit

Expected

Opening Time

1 Gaochun-Wuhu Expressway 2012–2014 2015

2 Liyang-Changzhou Expressway 2010–2015 2016

3 Gaochun-Liyang Expressway 2014–2016 2017

4 Tianchang-Yangzhou Expressway 2014–2017 2018

5 Yixing-Hangzhou Expressway 2015–2017 2018

6 Liyang-Guangde Expressway 2014–2017 2018

7 Xitong Bridge 2014–2017 2018

8 Changzhou-Yixing Expressway 2015–2018 2019

9 Wufengshan Bridge 2015–2020 2021

10 South Suxichang Channel unknown 2025

11 Yanjiang Intercity Railway

(Nanjing-Changzhou)

unknown 2030

— 479 —


(5) Vehicle Type Proportion

According to the historical and future developing trend of the vehicle type proportion

and related research results, we make a reasonable forecast about the composition of

passenger and goods vehicles. Specific results see Table 9 and Table 10.

Table 10 Passenger/Goods Vehicles Proportion Prediction on Xiyi Expressway and

Luma arterial road


2010 68.4% 1.9% 3.7% 1.6% 6.8% 6.6% 2.6% 3.6% 4.8% 100%

2011 70.6% 1.6% 3.0% 2.0% 6.7% 6.4% 2.4% 3.1% 4.2% 100%

2012 73.2% 1.4% 2.4% 2.4% 6.4% 6.0% 2.2% 2.3% 3.6% 100%

2013 73.6% 1.1% 1.8% 2.4% 6.6% 6.5% 2.2% 2.1% 3.7% 100%

2015 75.8% 0.9% 1.6% 2.3% 5.9% 6.3% 2.0% 1.7% 3.4% 100%

2020 78.8% 0.7% 1.3% 2.1% 5.0% 5.5% 1.8% 1.5% 3.2% 100%

2025 81.7% 0.5% 1.0% 1.9% 4.1% 4.8% 1.6% 1.3% 3.1% 100%

2028 83.2% 0.4% 0.8% 1.8% 3.5% 4.4% 1.5% 1.2% 3.2% 100%

Table 11 Passenger/Goods Vehicles Proportion Prediction on Taihu Lake-rim

Expressway


2010 66.2% 3.1% 2.2% 1.4% 7.4% 10.8% 3.1% 3.2% 2.5% 100%

2011 67.9% 2.7% 2.0% 1.3% 7.0% 10.5% 3.4% 3.0% 2.2% 100%

2012 69.7% 2.3% 2.0% 1.6% 6.5% 10.4% 3.3% 2.5% 1.7% 100%

2013 71.3% 1.8% 1.5% 1.1% 6.4% 10.6% 3.3% 2.3% 1.7% 100%

2015 75.8% 1.5% 1.3% 1.2% 5.6% 8.6% 2.4% 1.9% 1.8% 100%

2020 84.3% 0.9% 0.5% 0.9% 3.8% 5.3% 1.8% 1.3% 1.2% 100%

2025 77.9% 1.0% 0.8% 1.3% 4.0% 5.3% 3.1% 2.7% 3.8% 100%

2031 85.1% 0.4% 0.3% 0.7% 2.6% 3.1% 2.0% 2.2% 3.5% 100%

— 480 —


(6) Toll Standards

The prediction of the study on the toll revenue in future years is based on the current toll

standards, the adjustment of toll standards caused by inflation factors is not within the

scope of this prediction, so we don’t take it into consideration.

The passenger vehicle is charged by the type and the goods vehicle is charged by the

weight on expressways of Jiangsu, detailed toll standards are shown as follows:

Table 12 Vehicle Type Classification and Toll Standards on Expressway of Jiangsu

Vehicle type

Classification standard

Charge

coefficient

Toll rate

(RMB/km)

Minimum

charge

(RMB)

Passenger

vehicle Goods vehicle

Type1≤7seats 1 0.45 5

≤2tons 1.5 0.675 15

Type2

8seats–19seats 1.5 0.675 10

2tons–5tons

(including 5tons) 2 0.90 20

Type3

20seats–39seats 2 0.90 10

5tons–10tons

(including 10tons) 2.5 1.125 20

Type4

≥40seats 2 0.90 10

10–15tons (including

15tons) 20 foots

container car 3 1.35 30

Type5>15tons 40 foots

container car 3.5 1.575 30

— 481 —


Table 13 Expressway Toll Standards of Goods Vehicle by Weight (No Overloading

Vehicles)

Category

Total vehicle Axle

load <10tons

10tons≤Total vehicle

Axle load≤40tons

Total vehicle Axle

load >40tonsLess than 2.5 yuan is

canceled, among

2.51–7.50RMB

counted as 5, among

7.51–9.99 count

as10RMB.

Expressway charging standards

for weight:

1. The basic rate is 0.09 RMB/ton

per km

2. less than 5 tons counted as 5 tons

3. Less than 20 RMB, counted as

20 RMB

0.09RMB /ton Per km 0.09RMB/ton per km

Linear decline to

0.05RMB/ton per km

0.05RMB/ton per km

Table 14 Expressway Toll Standard of Overloaded Goods Vehicle

1. Normal quality and

overrun 30% (including

30%)

2. Overrun 30%-50%


overrun 50%)

3. Overrun 50%-100%


overrun 100%)

4. the vehicle overrun

more than 100%

When the quality of the

vehicle and goods

overrun the total quality

limit and the total axle

limit at the same time,

we always choose the

bigger limit

Use basic rate to charge

temporarily

Normal quality and the 30% overrun part use basic charging rate to charge







From the time 12 P.M. on February 28, 2009, new overloaded goods vehicle charge

standard by weight has been implemented:

1. The 30% overrun part (including 30%), charged as 0.09 RMB per ton per km;

2. The 30%–100% overrun part (including 100%), charged 3–6times of 0.09 RMB per

ton per km;

3. The 100% overrun part, charged 6 times of 0.09 RMB per ton per km;

In addition to the adjustment of overloaded vehicle’s toll standard, other administration of

charge still in accordance with the original regulations.

— 482 —


(7) Forecast Methodology of Toll Revenue

• Forecast Methodology of Passenger Vehicle Toll Revenue

According to the expressway toll methods and standards, the passenger vehicles

are tolled by vehicle type and mileages. Therefore, the annual average daily

traffic (AADT) converted by the forecast future year traffic of all vehicle types, is

multiplied by the road kilometers and toll rate (RMB per Km) of all vehicle types,

and then the toll revenue of each vehicle type (Ap) can be obtained.

But there exists an error between the actual toll revenue of passenger vehicles

and that calculated by the above-mentioned methods, because of the expressway

“Minimum Charge” policy and the calculation principle that the value under

RMB2.50 is rounded off, that from RMB2.51 to RMB7.50 is rounded up to

RMB5.00, and that from RMB7.51 to RMB10.00 is rounded up to RMB10.00.

From the view of the accumulation of long-term and massive samples, the error

can be deemed as the system error. There is a steady proportion between the

actual revenue Bp and the revenue Ap calculated by model and mileage. The Cp

is a coefficient between Bp and Ap. Therefore, the final toll revenue of passenger

vehicle is Ap × Cp.

• Forecast Methodology of Goods Vehicle Toll Revenue

The goods vehicle is charged by weight. The toll revenue of each goods vehicle

can’t be calculated directly because the toll of each goods vehicle relates to the

total mass of the freight and the vehicle itself. Before the implementation of weight

toll, the goods vehicle is charged in the same way as the passenger vehicle, by

type and mileages. The purpose of the weight toll is to prevent the phenomenon of

goods overload but not to raise the toll level. Therefore, the weight-toll standard

is made to keep basically the same as toll revenue calculated by type and mileages

(or trip) on the conditions that the vehicle is not overloaded. That means the goods

vehicle toll revenue Ag can also be obtained from calculation by type and mileages

(or trip).

— 483 —


Similarly because of the rounding, minimum charges, monthly-ticket vehicles,

surcharges, etc., there exists an error between Ag and the actual goods vehicle toll

revenue Bg. This error is not a stable value and mainly affected by the overload

status. The coefficient Cg between Bg and Ag can also be got from the actual toll

revenue and traffic data of previous years. The data of previous years show that

the phenomenon of overload has been effectively controlled as the weight-toll

policy has been implemented for a long time in Jiangsu Province (the percentage

of overloaded goods vehicles over all goods vehicles has been controlled under

5% during the “11th Five Years Plan” and expected to be lower than 2% during

the “12th Five Years Plan”). The toll revenue of single goods vehicle has a stable

trend and the coefficient Cg is also stable. Therefore, the toll revenue of goods

vehicle in future years can be amended by Cg’ obtained from past data. Taking into

account the goods vehicle loading rates will have a certain level of growth, which

will result in the truck correction factor have a certain rise, that is, the toll revenue

of future years goods vehicle is Ag × Cg’, in consideration of that Cg’ is expected

to increase as a result of increase of loading rates of goods vehicles.

(8) Forecast Methodology of Operation and Maintenance Costs

• Forecast Methodology of Operation Costs

Operation costs include payment of employees and administrative costs.

Payment of employees employee costs includes wages and surcharges, employee

benefits, housing fund, labor insurance and other expenses. According to analyzing

historical development trend of payment of employees of Xiyi Company, and

combining with The Twelfth Five-Year Plan for National Economic and Social

Development of the People’s Republic of China and Jiangsu Province on the

development goals of per capita income, and taking into account the profit of the

Expressway Company, consultant believes that the payment of employees will grow

continually, but the growth rate will decrease year by year from 7% before 2020 to

3% finally.

Administrative costs mainly include travel expenses, office expenses, utility

expenses, vehicle use tolls, communication expenses, promotional expenses,

entertainment expenses, etc. This part of the cost is stable in the statistics of Xiyi

Company. In this prediction, Consultant takes 2% as the annual growth rate.

— 484 —


• Forecast Methodology of Maintenance Costs

According to “Jiangsu Expressway Maintenance and Management Measures”, the

maintenance costs includes routine maintenance and medium & major overhaul.

Routine maintenance means preventive maintenance to the expressways facilities

and repair to the their affiliated facilities in order to keep them in good condition,

such as road cleaning, separator cleaning, shoulder refurbishment, slope dredging,

drainage facilities dredging, typical pumping, small pavement disease treatment,

bridge expansion joints cleaning, sign cleaning, guardrail cleaning, partial

maintenance, etc. According to the daily maintenance costs that have occurred since

open to traffic, the allocation of costs are 40% to transportation-related projects

and 60% to non-transportation projects. It is expected that 40% of the maintenance

costs used in transportation projects such as small pavement hazards maintenance

will increase with the growth of traffic, but 60% of the maintenance costs used in

non-transportation projects such as regular cleaning will remain unchanged.

Medium & major overhaul mainly refers to works to be conducted in order to fully

restore the expressways to satisfy original design standards by way of long-term

comprehensive repair of material damage on the expressways and their facilities, or

refers to partial improvement and separate construction of additional works within

the original level in order to increase the expressway’s capacity gradually. For

example, completely renovating the road which reaches the service life to restore

its original design condition, or timely repairing the major damage caused by

floods, earthquakes, and so on, to ensure its normal use.

The outline of the expressway maintenance and management development in

“Twelfth Five-Year” Plan issued by the Ministry of Communications points out

that, we must increase preventive maintenance efforts, and establish the ideal

of total life-cycle maintenance costs, formulate preventive maintenance guide

policies and technical standards which are suitable for China’s national conditions,

explore the formation of a series of preventive maintenance techniques, set aside

a certain percentage of special funds for the fully implementing of the preventive

maintenance. On the foundation of routine maintenance, we increase expressway

maintenance funding and organize the road medium & major overhaul project

to maintain road infrastructure in good technical conditions and ensure the road

network’s capacity and service level. According to the spirit of this outline, we

should strengthen the routine preventive maintenance to reduce the medium &

major overhaul. Therefore, this forecast will be sized to preventive maintenance

repair a partial substitute, to the medium & major overhaul, some intermediate and

major overhaul costs will be in the form of preventive maintenance costs which are

assessed annually.

— 485 —


“Jiangsu Expressway Maintenance and Management Measures” points out that

“Expressways should be patrolled everyday and regular inspections, periodical

inspections and special inspections should also be conducted; expressway diseases

and problems which are founded in patrol and inspections shall be solved without

delay”. Complying to this principle, during the maintenance period of Jiangsu

Expressway, it can get timely maintenance repair from the annual investment of

medium & major overhaul to avoid one-time large-scale restoration project which

could interfere the expressway operation.

Because of the volatility of medium & major overhaul cost, the first three years’

forecasting costs are according to the maintenance project of Xiyi Company and

the empirical data. Afterwards, medium & major overhaul costs are reasonably

allocated to each year combining with the growth of traffic volume. Forecasting

the costs are allocated 40% to transportation-related projects and 60% to non-

transportation.

(9) The other Assumption in the Process of Prediction

• The last year of the operating period of each expressway in Jiangsu Province is

inconsistent, if strictly conducting in accordance with the existing toll period, it

may transfer the traffic volume flow to a little far-away but free roads; at the same

time, there is no clear basis for judging future charges policy adjustments. The

project suggests that in perspective, the traffic volume and toll revenue in each

study road is unaffected to the other free expressways.

• As a commodity, the toll standard of toll charges of expressways should, in

principle and based on general market practice, increase together with the inflation

and increase in operation and management costs. However, since expressways

constitute one of the basic needs of the general public, they are also part of the

public construction projects that could affect livelihood of the general public.

Hence the increase in toll charges would have an adverse effect on social stability,

quality of living and corporate and industrial development. In view of the

uncertainty in respect of the increase in toll charges, from a conservative point

of view, it is considered more likely that the policy of toll rate standard would

remain consistent with the present standard. In view of the above, Jiangsu Weixin

Engineering Consultant Limited Company and the board of directors of Jiangsu

Expressway Company Limited consider such assumption to be fair and reasonable.

— 486 —


• The revenue forecast does not consider future toll rate adjustment, that is to say the

future toll standard is consistent with the present.

• In the future, Jiangsu Expressway Network Operation and Management Center may

seek more accurate assignment methods than the shortest route method to split the

toll revenue of every expressway operating company. The forecast will not consider

this factor which affects the prediction accuracy .

• It usually takes the capacity of designed service level as the upper road traffic

volume. But the traffic volume of some roads has exceeded the capacity of the

secondary service levels on Huning, Sujiahang, Guangjing-Xicheng Expressway

which have higher traffic volume than other places in Jiangsu. Based on the actual

situation, the prediction cancels the restrictions of the secondary service level’s

section runoff capacity and takes the fourth service level as a strict traffic limit;

meanwhile, considering reaching the secondary service road traffic, road congestion

has a certain restriction to traffic growth by a certain discount of growth rates.

• Income only means the main business income, that is to say the road toll revenue.

According to the “Notice of Explicitly Imposing Standards of Expressway Network

Toll and other Relevant Matters”.([2014]No.29 Su-Jia-Fu Document), 10% of the

toll revenue of each network expressway (excluding the cross-river channel) is

taken as overall development costs of expressways and general highways, which

is contributed to appointed account of provincial finance monthly and operated by

Jiangsu Transport Department. The policy is tentatively scheduled for 10 years,

ends on 31th of December in 2023. Because of the unclear future policy, the

forecast assumes that the policy will be extended to the end of toll period.

• Operation and maintenance costs refer to Xiyi Company’s operation and

maintenance costs which deducted part of the depreciation costs; meanwhile, the

operation and maintenance costs in 2013 are apportioned by the road mileage of

company’s overall operating costs for the actual costs of each road can not be

accounted from the company’s costs statistics.

— 487 —


• In the relevant projections concerning costs, operational costs and management

costs were considered separately as different aspects of the costs, and the factor of

inflation had already been taken account when assessing the increase in operational

costs and management costs. Hence inflation had not been taken into account in

respect of the assessment of the costs as a whole. In view of the above, Jiangsu

Weixin Engineering Consultant Limited Company and the board of directors of

Jiangsu Expressway Company Limited consider such assumption to be fair and

reasonable.

5. CONCLUSION

(1) Forecast Results Of Traffic Volume and Toll Revenue

According to the assumption and methodology applied in the prediction, we obtained the

result of average traffic volume and toll revenue for the combination of Xiyi Expressway

and Luma Arterial Road, Taihu Lake-rim Expressway. See the table below.

Table 15 Average Traffic Volume and Toll Revenue Prediction of Xiyi Expressway

and Luma Arterial Road

YearTraffic volume Growth rate Toll revenue Growth rate Influence factor

(veh/day)

(10000

RMB/year)

2011(a) 14529 23,495

2012(a) 14873 2.4% 22,392 –4.7%

2013(a) 16154 8.6% 23,302 4.1%

2014 17584 8.8% 25,117 7.8%

2015 19136 8.8% 27,200 8.3%

2016 20783 8.6% 29,396 8.1%

2017 22536 8.4% 31,718 7.9%

2018 24352 8.1% 34,105 7.5%

2019 26100 7.2% 36,372 6.6% little negative effect of the

opening of the Changyi

Expressway

— 488 —



(veh/day)

(10000

RMB/year)

2020 27974 7.2% 38,789 6.6%

2021 31329 12.0% 43,247 11.5% positive effect of the

opening of Wufengshan

Bridge

2022 33235 6.1% 45,672 5.6%

2023 35114 5.7% 48,038 5.2%

2024 36952 5.2% 50,324 4.8%

2025 33807 -8.5% 45,833 –8.9% negative effect of the

opening of South Channel

2026 35416 4.8% 47,795 4.3%

2027 36935 4.3% 49,617 3.8%

2028 38349 3.8% 38,594 –22.2%

Table 16 Traffic Volume and Toll Revenue Prediction of Taihu Lake-rim

Expressway


(veh/day)

(10000

RMB/year)

2011(a) 5002 — 1,986 —

2012(a) 5118 2.3% 1,868 –5.9%

2013(a) 6157 20.3% 2,125 13.7%

2014 7185 16.7% 2,282 7.4%

2015 8228 14.5% 2,584 13.2%

2016 9344 13.6% 2,902 12.3%

2017 10496 12.3% 3,216 10.8%

2018 11634 10.8% 3,518 9.4%

2019 12818 10.2% 3,820 8.6%

2020 13931 8.7% 4,144 8.5%

2021 15003 7.7% 4,334 4.6%

2022 16008 6.7% 4,561 5.2%

2023 16920 5.7% 4,755 4.2%

2024 17835 5.4% 4,968 4.5%

2025 46372 160.0% 14,443 190.7% positive effect of the

opening of South Channel2026 47893 3.3% 14,774 2.3%

— 489 —



(veh/day)

(10000

RMB/year)

2027 49363 3.1% 15,078 2.1%

2028 50772 2.9% 15,354 1.8%

2029 52153 2.7% 15,613 1.7%

2030 53479 2.5% 15,846 1.5%

2031 (1–10) 54766 2.4% 13,393 –15.5%

Note:

1. The traffic volume for each road in 2013 is the annual average traffic volume of section flow by the Expressway Network Center1 in 2013.

2. Income only means the main business income, that is to say the road toll revenue. In this prediction, 10% has been deducted to turn over to the government for road construction.

3. The expense period of Xiyi Expressway and Luma arterial road ends in September 2028. The expense period of Taihu-rim Lake Expressway ends in November 2031. The actual income in the final year of the Project Road has been reduced by the actual months.

Toll revenue of each road of Xiyi company is shown below.

Table 17 Xiyi Company Toll Revenue Prediction in the Future Years (Unit: Million)

Year Toll Revenue Year Toll Revenue

2013 25,427 2023 52,793

2014 27,398 2024 55,292

2015 29,784 2025 60,276

2016 32,297 2026 62,569

2017 34,935 2027 64,695

2018 37,623 2028 53,948

2019 40,192 2029 15,613

2020 42,933 2030 15,846

2021 47,581 2031 13,393

2022 50,233

1 Jiangsu Expressway Network Operation & Management Centre (“Network Centre”) reorganised in December 2004, is a non-profit organisation established by the Jiangsu Expressway Network Operation & Management Committee, which is held by Communications Holdings and jointly set up by the expressway operation companies in the province. Its main responsibilities involve the monitoring and settlement of revenue income of the Jiangsu expressway network, the collection and issue of public information concerning the expressways within its network and attending to the relevant cooperation and management work. The data from the Network Centre used in the traffic consultant’s report is therefore considered to be reliable.

— 490 —


(2) Forecast Results Of Operation and Maintenance Costs

According to the assumption and methodology of forecast, the forecast results of

operation and maintenance costs of Xiyi Expressway in this project are shown as below.

Table 18 Forecast Results Of Operation and Maintenance Costs of Xiyi Expressway

Company (Unit: Million)

Xiyi Expressway

and Luma

Arterial Road

Taihu Lake-rim

Expressway Cost Total

2013 5,311 1,444 6,755

2014 5,929 1,630 7,559

2015 6,218 1,721 7,938

2016 6,373 1,774 8,148

2017 6,742 1,884 8,626

2018 7,132 1,998 9,130

2019 7,541 2,118 9,659

2020 7,977 2,242 10,219

2021 8,386 2,347 10,733

2022 8,770 2,455 11,224

2023 9,169 2,566 11,735

2024 9,586 2,681 12,267

2025 9,908 3,153 13,061

2026 10,362 3,280 13,642

2027 10,836 3,413 14,248

2028 8,498 3,551 12,048

2029 0 3,695 3,695

2030 0 3,847 3,847

2031 0 3,306 3,306

Yours faithfully


Jiangsu Weixin Engineering Consultant Ltd.

Wangjian

Director

— 491 —

APPENDIX VIA UNAUDITED PRO FORMA FINANCIAL INFORMATION IN CONNECTION WITH THE NINGCHANG ZHENLI TRANSACTION

The information set out in this Appendix does not form part of the Accountants’ Report on Ningchang

Zhenli nor part of the Accountants’ Report on Xiyi Company from Deloitte Touche Tohmatsu, the

reporting accountant of Ningchang Zhenli and Xiyi Company, respectively, as set out in “Appendix

IIA — Accountants’ Report on Ningchang Zhenli” and “Appendix IIB — Accountants’ Report on Xiyi

Company”, and is included herein for information only. The Pro Forma Financial Information should

be read in conjunction with the Accountants’ Reports set out in “Appendix IIA — Accountants’ Report

on Ningchang Zhenli” and “Appendix IIB — Accountants’ Report on Xiyi Company”.

A. UNAUDITED PRO FORMA FINANCIAL INFORMATION IN CONNECTION WITH

THE NINGCHANG ZHENLI TRANSACTION

The following is an illustrative and unaudited pro forma financial information of the Enlarged

Group (inclusive of Ningchang Zhenli) (“Unaudited Pro Forma Financial Information”)

which have been prepared on the basis of the notes set out below for the purpose of illustrating

the effects of the Ningchang Zhenli Transaction. The Unaudited Pro Forma Financial

Information has been prepared as if the Ningchang Zhenli Transaction had taken place on 30

September 2014.

This Unaudited Pro Forma Financial Information has been prepared for illustrative purposes

only and, because of its hypothetical nature, it may not give a true picture of the financial

position of the Group had the Ningchang Zhenli Transaction been completed as at 30 September

2014 or at any future date. The Unaudited Pro Forma Financial Information should be read in

conjunction with other financial information included elsewhere in this circular.

— 492 —


B. UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS AT 30

SEPTEMBER 2014

Unaudited

consolidated

balance sheet

of the Group

as at 30

September

2014

Audited

balance sheet

of Ningchang

Zhenli as at

30 September

2014 Other pro forma adjustments

Unaudited

pro forma

consolidated

balance sheet

as at 30

September

2014

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Note 1 Note 1 Note 2 Note 3

Current Assets:

Cash and bank balances 563,198 108,071 — — 671,269

Held-for-trading financial assets 40,319 — — — 40,319

Notes receivable 808 — — — 808

Accounts receivable 106,011 17,028 — — 123,039

Prepayments 318,883 522 — — 319,405

Dividends receivable 33,776 — — — 33,776

Interest receivable — — — — —

Other receivables 1,219,001 1,597 — — 1,220,598

Inventories 2,980,650 609 — — 2,981,259

Other current assets 179,402 — — — 179,402

Total Current Assets 5,442,048 127,827 — — 5,569,875

— 493 —


Unaudited

consolidated

balance sheet

of the Group

as at 30

September

2014

Audited

balance sheet

of Ningchang

Zhenli as at

30 September


Unaudited

pro forma

consolidated

balance sheet

as at 30

September

2014



Non-current Assets:

Available-for-sale

financial assets 1,290,726 11,230 — — 1,301,956

Long-term equity investment 4,014,812 — — — 4,014,812

Investment properties 34,387 — — — 34,387

Fixed assets 1,079,532 526,609 — — 1,606,141

Construction in progress 219,152 — — — 219,152

Intangible assets 15,110,534 7,018,362 — — 22,128,896

Long-term prepaid expenses 1,524 — — — 1,524

Deferred tax assets 37,268 — — — 37,268

Total Non-current Assets 21,787,935 7,556,201 — — 29,344,136

TOTAL ASSETS 27,229,983 7,684,028 — — 34,914,011

— 494 —


Unaudited

consolidated

balance sheet

of the Group

as at 30

September

2014

Audited

balance sheet

of Ningchang

Zhenli as at

30 September


Unaudited

pro forma

consolidated

balance sheet

as at 30

September

2014




Short-term borrowings 3,940,000 1,035,000 — — 4,975,000

Accounts payable 528,391 29,034 — — 557,425

Receipts in advance 389,590 69 — — 389,659

Employee benefits payable 1,452 2,855 — — 4,307

Taxes payable 104,780 2,194 — — 106,974

Interest payable 142,258 55,235 — — 197,493

Dividends payable 68,679 — — — 68,679

Other payables 33,348 52,168 502,000 3,750 591,266


due within one year 500,459 499,000 — — 999,459

Other current liabilities 500,000 — — — 500,000

Total Current Liabilities 6,208,957 1,675,555 502,000 3,750 8,390,262

— 495 —


Unaudited

consolidated

balance sheet

of the Group

as at 30

September

2014

Audited

balance sheet

of Ningchang

Zhenli as at

30 September


Unaudited

pro forma

consolidated

balance sheet

as at 30

September

2014




Long-term borrowings 269,810 4,561,500 — — 4,831,310

Deferred tax liabilities 2,341 — — — 2,341

Bonds payable 494,245 1,200,000 — — 1,694,245

Other non-current liabilities — 36,470 — — 36,470

Total Non-current Liabilities 766,396 5,797,970 — — 6,564,366

TOTAL LIABILITIES 6,975,353 7,473,525 502,000 3,750 14,954,628


Share capital 5,037,748 3,328,850 -3,328,850 — 5,037,748

Capital reserve 7,565,101 — 2,826,850 — 10,391,951

Surplus reserve 2,833,298 — — — 2,833,298

Retained profits 4,299,898 -3,118,347 — -3,750 1,177,801

Total shareholders’ equity

attributable to equity

holders of the Company 19,736,045 210,503 -502,000 -3,750 19,440,798

Minority interests 518,585 — — — 518,585

TOTAL SHAREHOLDERS’

EQUITY 20,254,630 210,503 -502,000 -3,750 19,959,383

TOTAL LIABILITIES AND

SHAREHOLDERS’

EQUITY 27,229,983 7,684,028 — — 34,914,011

— 496 —


C. NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION

1. The unaudited consolidated balance sheet of the Group as at 30 September 2014 is

extracted from the unaudited consolidated financial statements of the Group for the nine

months ended 30 September 2014 as set out in the Company’s published third-quarter

report dated 30 October 2014. The audited balance sheet of Ningchang Zhenli as at 30

September 2014 is extracted from the accountants’ report of Ningchang Zhenli as at 30

September 2014 as set out in Appendix IIA to this circular.

2. According to the acquisition agreement, the Company has conditionally agreed to acquire

all equity interest in Ningchang Zhenli for a total consideration of RMB502,000,000.

The Unaudited Pro Forma Financial Information has been prepared as if the Ningchang

Zhenli Transaction had taken place on 30 September 2014. The consideration of

RMB502,000,000 is recognized as payable to the shareholder of Ningchang Zhenli as at

30 September 2014 and will be settled within 30 working days after the completion of

Ningchang Zhenli Transaction.

Ningchang Zhenli is currently controlled by the Company’s ultimate shareholder Jiangsu

Communications Holding Company Limited. The Ningchang Zhenli Transaction deemed

as completed on 30 September 2014 is considered as a business combination under

common control because the Company and Ningchang Zhenli were continued to be

ultimately controlled by Jiangsu Communications Holding Company Limited both before

and after the transaction. The acquisition of Ningchang Zhenli is accounted for using the

accounting treatment of business combinations under common control in accordance with

Accounting Standards for Business Enterprise No.20 — Business Combinations issued by

the China Ministry of Finance.

According to the Accounting Standards for Business Enterprise No.33 — Consolidated

Financial Statements issued by the China Ministry of Finance, no matter when the

business combination occurs in the reporting period, subsidiaries acquired through a

business combination involving enterprises under common control are included in the

Group’s scope of consolidation as if they had been included in the scope of consolidation

from the date when they first came under the common control of the ultimate controlling

party.

— 497 —


The difference between the share capital of Ningchang Zhenli and the carrying amount of

the consideration paid for Ningchang Zhenli Transaction is adjusted to capital reserve as

below.

RMB’000

The share capital of Ningchang Zhenli 3,328,850

Less: Acquisition consideration of Ningchang Zhenli Transaction 502,000

Capital reserve 2,826,850

3. The adjustment represents accrual for estimated acquisition-related costs of approximately

RMB3,750,000 which would be expensed in profit or loss as if the Ningchang Zhenli

Transaction had taken place on 30 September 2014.

4. No adjustments have been made to reflect any trading results or other transaction of the

Group entered into subsequent to 30 September 2014.

— 498 —




INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE

COMPILATION OF PRO FORMA FINANCIAL INFORMATION


We have completed our assurance engagement to report on the compilation of pro forma financial

information of Jiangsu Expressway Company Limited (the “Company”) and its subsidiaries

(hereinafter collectively referred to as the “Group”) by the directors of the Company (the “Directors”)

for illustrative purposes only. The pro forma financial information (the “Pro Forma Financial

Information”) consists of the pro forma consolidated balance sheet as at 30 September 2014 and

related notes as set out on pages 491 to 497 in Appendix VIA of the circular issued by the Company

dated 23 January 2015 (the “Circular”). The applicable criteria on the basis of which the Directors

have compiled the Pro Forma Financial Information are described on pages 491 to 497 in Appendix

VIA of the Circular.

The Pro Forma Financial Information has been compiled by the Directors to illustrate the impact of the

proposed acquisition of 江蘇寧常鎮溧高速公路有限公司 (Jiangsu Ningchang Zhenli Expressway

Company Limited, referred to as “Ningchang Zhenli”) on the Group’s financial position as at 30

September 2014 as if the proposed acquisition of Ningchang Zhenli had taken place at 30 September

2014. As part of this process, information about the Group’s financial position has been extracted by

the Directors from the Group’s financial statements for the period ended 30 September 2014, on which

no audit or review report has been published.

Directors’ Responsibilities for the Pro Forma Financial Information

The Directors are responsible for compiling the Pro Forma Financial Information in accordance with

paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong

Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 Preparation of Pro

Forma Financial Information for Inclusion in Investment Circulars (“AG 7”) issued by the Hong Kong

Institute of Certified Public Accountants (“HKICPA”).

— 499 —


Reporting Accountants’ Responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules,

on the Pro Forma Financial Information and to report our opinion to you. We do not accept any

responsibility for any reports previously given by us on any financial information used in the

compilation of the Pro Forma Financial Information beyond that owed to those to whom those reports

were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements

(“HKSAE”) 3420 Assurance Engagements to Report on the Compilation of Pro Forma Financial

Information Included in a Prospectus issued by the HKICPA. This standard requires that the

reporting accountant comply with ethical requirements and plan and perform procedures to obtain

reasonable assurance about whether the Directors have compiled the Pro Forma Financial Information

in accordance with paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the

HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports

or opinions on any historical financial information used in compiling the Pro Forma Financial

Information, nor have we, in the course of this engagement, performed an audit or review of the

financial information used in compiling the Pro Forma Financial Information.

The purpose of Pro Forma Financial Information included in an investment circular is solely to

illustrate the impact of a significant event or transaction on unadjusted financial information of the

Group as if the event had occurred or the transaction had been undertaken at an earlier date selected

for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome

of the event or transaction at 30 September 2014 would have been as presented.

A reasonable assurance engagement to report on whether the Pro Forma Financial Information has

been properly compiled on the basis of the applicable criteria involves performing procedures to assess

whether the applicable criteria used by the Directors in the compilation of the Pro Forma Financial

Information provide a reasonable basis for presenting the significant effects directly attributable to the

event or transaction, and to obtain sufficient appropriate evidence about whether:

• The related pro forma adjustments give appropriate effect to those criteria; and

• The Pro Forma Financial Information reflects the proper application of those adjustments to the

unadjusted financial information.

— 500 —


The procedures selected depend on the reporting accountant’s judgment, having regard to the reporting

accountant’s understanding of the nature of the Group, the event or transaction in respect of which the

Pro Forma Financial Information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the Pro Forma Financial

Information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our

opinion.

Opinion

In our opinion:

(a) the Pro Forma Financial Information has been properly compiled on the basis stated;

(b) such basis is consistent with the accounting policies of the Group; and

(c) the adjustments are appropriate for the purposes of the Pro Forma Financial Information as

disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

Deloitte Touche Tohmatsu

Certified Public Accountants LLP

Shanghai , China

23 January 2015

— 501 —

APPENDIX VIB UNAUDITED PRO FORMA FINANCIAL INFORMATION IN CONNECTION WITH THE XIYI COMPANY TRANSACTION








A. UNAUDITED PRO FORMA FINANCIAL INFORMATION IN CONNECTION WITH

XIYI COMPANY TRANSACTION


Group (inclusive of Xiyi Company) (“Unaudited Pro Forma Financial Information”) which

have been prepared on the basis of the notes set out below for the purpose of illustrating the

effects of the Xiyi Company Transaction. The Unaudited Pro Forma Financial Information has

been prepared as if the Xiyi Company Transaction had taken place on 30 September 2014.



position of the Group had the Xiyi Company Transaction been completed as at 30 September

2014 or at any future date. The Unaudited Pro Forma Financial Information should be read in

conjunction with other financial information included elsewhere in this circular.

— 502 —


B. UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS AT 30

SEPTEMBER 2014

Unaudited

consolidated

balance

sheet of the

Group as at

30 September

2014

Audited

balance

sheet of Xiyi

Company as at

30 September


Unaudited

pro forma

consolidated

balance sheet

as at 30

September

2014



Current Assets:

Cash and bank balances 563,198 45,947 — — 609,145

Held-for-trading financial assets 40,319 — — — 40,319

Notes receivable 808 — — — 808

Accounts receivable 106,011 3,882 — — 109,893

Prepayments 318,883 342 — — 319,225

Dividends receivable 33,776 — — — 33,776

Interest receivable — — — — —

Other receivables 1,219,001 533 — — 1,219,534

Inventories 2,980,650 219 — — 2,980,869

Other current assets 179,402 — — — 179,402

Total Current Assets 5,442,048 50,923 — — 5,492,971

— 503 —


Unaudited

consolidated

balance

sheet of the

Group as at

30 September

2014

Audited

balance

sheet of Xiyi

Company as at

30 September


Unaudited

pro forma

consolidated

balance sheet

as at 30

September

2014



Non-current Assets:

Available-for-sale

financial assets 1,290,726 11,230 — — 1,301,956

Long-term equity investment 4,014,812 — — — 4,014,812

Investment properties 34,387 — — — 34,387

Fixed assets 1,079,532 105,038 — — 1,184,570

Construction in progress 219,152 510 — — 219,662

Intangible assets 15,110,534 2,299,509 — — 17,410,043

Long-term prepaid expenses 1,524 — — — 1,524

Deferred tax assets 37,268 — — — 37,268

Total Non-current Assets 21,787,935 2,416,287 — — 24,204,222

TOTAL ASSETS 27,229,983 2,467,210 — — 29,697,193

— 504 —


Unaudited

consolidated

balance

sheet of the

Group as at

30 September

2014

Audited

balance

sheet of Xiyi

Company as at

30 September


Unaudited

pro forma

consolidated

balance sheet

as at 30

September

2014




Short-term borrowings 3,940,000 615,000 — — 4,555,000

Accounts payable 528,391 5,632 — — 534,023

Receipts in advance 389,590 191 — — 389,781

Employee benefits payable 1,452 1,786 — — 3,238

Taxes payable 104,780 923 — — 105,703

Interest payable 142,258 28,461 — — 170,719

Dividends payable 68,679 — — — 68,679

Other payables 33,348 23,850 662,000 3,748 722,946


due within one year 500,459 20,000 — — 520,459

Other current liabilities 500,000 — — — 500,000

Total Current Liabilities 6,208,957 695,843 662,000 3,748 7,570,548


Long-term borrowings 269,810 362,000 — — 631,810

Deferred tax liabilities 2,341 — — — 2,341

Bonds payable 494,245 750,000 — — 1,244,245

Other non-current liabilities — — — — —

Total Non-current Liabilities 766,396 1,112,000 — — 1,878,396

TOTAL LIABILITIES 6,975,353 1,807,843 662,000 3,748 9,448,944

— 505 —


Unaudited

consolidated

balance

sheet of the

Group as at

30 September

2014

Audited

balance

sheet of Xiyi

Company as at

30 September


Unaudited

pro forma

consolidated

balance sheet

as at 30

September

2014




Share capital 5,037,748 824,170 -824,170 — 5,037,748

Capital reserve 7,565,101 — 137,845 — 7,702,946

Surplus reserve 2,833,298 — — — 2,833,298

Retained profits 4,299,898 -164,803 24,720 -3,748 4,156,067

Total shareholders’ equity

attributable to equity

holders of the Company 19,736,045 659,367 -661,605 -3,748 19,730,059

Minority interests 518,585 — -395 — 518,190

TOTAL SHAREHOLDERS’

EQUITY 20,254,630 659,367 -662,000 -3,748 20,248,249

TOTAL LIABILITIES

AND SHAREHOLDERS’

EQUITY 27,229,983 2,467,210 — — 29,697,193

— 506 —






report dated 30 October 2014. The audited balance sheet of Xiyi Company are extracted

from the accountants’ report of Xiyi Company as at 30 September 2014 as set out in

Appendix IIB to this circular.

2. According to the acquisition agreement, Jiangsu Guangjing Xicheng Expressway

Company Limited (“Guangjing Xicheng”), a 85%-owned subsidiary of the Company,

has conditionally agreed to acquire all equity interest in Xiyi Company for a total

consideration of RMB662,000,000. The Unaudited Pro Forma Financial Information has

been prepared as if the Xiyi Company Transaction had taken place on 30 September

2014. The consideration of RMB662,000,000 is recognized as payable to the shareholders

of Xiyi Company as at 30 September 2014 and will be settled within 30 working days

after the completion of Xiyi Company Transaction.

Xiyi Company is currently controlled by the Company’s ultimate shareholder Jiangsu

Communications Holding Company Limited. The Xiyi Company Transaction deemed as

completed on 30 September 2014 is considered as a business combination under common

control because Guangjing Xicheng and Xiyi Company were continued to be ultimately

controlled by Jiangsu Communications Holding Company Limited both before and after

the transaction. The acquisition of Xiyi Company is accounted for using the accounting

treatment of business combinations under common control in accordance with Accounting

Standards for Business Enterprise No.20 — Business Combinations issued by the China

Ministry of Finance.




business combination involving the party being absorbed under merger by absorption are

included in the Group’s scope of consolidation as if they had been included in the scope

of consolidation from the date when they first came under the common control of the

ultimate controlling party.

— 507 —


The difference between the share capital of Xiyi Company and the carrying amount of

the consideration paid for Xiyi Company Transaction is adjusted to capital reserve and

minority interests as below.

RMB’000

The share capital of Xiyi Company 824,170

Less: Acquisition consideration of Xiyi Company Transaction 662,000

162,170

Being allocated to:

Capital reserve 137,845

Minority interests of Guangjing Xicheng 24,325

The accumulated losses of Xiyi Company attributable to the minority interests of

Guangjing Xicheng is as follow.

RMB’000

The accumulated losses of Xiyi Company 164,803

The minority interests in Guangjing Xicheng 15%

The accumulated losses of Xiyi Company attributable to

the minority interests of Guangjing Xicheng 24,720


RMB3,748,000 which would be expensed in profit or loss as if the Xiyi Company

Transaction had taken place on 30 September 2014.



— 508 —












related notes as set out on pages 501 to 507 in Appendix VIB of the circular issued by the Company



VIB of the Circular.


proposed acquisition of 江蘇錫宜高速公路有限公司 (Jiangsu Xiyi Expressway Company Limited,

referred to as “Xiyi Company”) on the Group’s financial position as at 30 September 2014 as if the

proposed acquisition of Xiyi Company had taken place at 30 September 2014. As part of this process,

information about the Group’s financial position has been extracted by the Directors from the Group’s

financial statements for the period ended 30 September 2014, on which no audit or review report has

been published.







— 509 —









(“HKSAE”) 3420 Assurance Engagements to Report on the Compilation of Pro Forma Financial

Information Included in a Prospectus issued by the HKICPA. This standard requires that the

reporting accountant comply with ethical requirements and plan and perform procedures to obtain

reasonable assurance about whether the Directors have compiled the Pro Forma Financial Information

in accordance with paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the

HKICPA.


















— 510 —






Information.


opinion.

Opinion

In our opinion:







Shanghai, China

23 January 2015

— 511 —

APPENDIX VIC UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP








A. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED

GROUP


Group (“Unaudited Pro Forma Financial Information”) which have been prepared on the

basis of the notes set out below for the purpose of illustrating the effects of the Ningchang

Zhenli Transaction and Xiyi Company Transaction. The Ningchang Zhenli Transaction and

Xiyi Company Transaction are not inter-conditional with each other. The Unaudited Pro Forma

Financial Information has been prepared as if the Ningchang Zhenli Transaction and Xiyi

Company Transaction had taken place together on 30 September 2014.



position of the Group had the Ningchang Zhenli Transaction and Xiyi Company Transaction

been completed as at 30 September 2014 or at any future date. The Unaudited Pro Forma

Financial Information should be read in conjunction with other financial information included

elsewhere in this circular.

— 512 —


B. NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION

Unaudited consolidated

balance sheet of the Group

as at 30 September 2014

Audited balance sheet of Ningchang

Zhenli as at 30 September 2014

Audited balance sheet of Xiyi

Company as at 30 September


Unaudited pro forma

consolidated balance sheet


RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000Note 1 Note 1 Note 1 Note 2 Note 3 Note 4

Current Assets:Cash and bank balances 563,198 108,071 45,947 — — — 717,216Held-for-trading financial assets 40,319 — — — — — 40,319Notes receivable 808 — — — — — 808Accounts receivable 106,011 17,028 3,882 — — — 126,921Prepayments 318,883 522 342 — — — 319,747Dividends receivable 33,776 — — — — — 33,776Interest receivable — — — — — — —Other receivables 1,219,001 1,597 533 — — — 1,221,131Inventories 2,980,650 609 219 — — — 2,981,478Other current assets 179,402 — — — — — 179,402

Total Current Assets 5,442,048 127,827 50,923 — — — 5,620,798

Non-current Assets:Available-for-sale financial assets 1,290,726 11,230 11,230 — — — 1,313,186Long-term equity investment 4,014,812 — — — — — 4,014,812Investment properties 34,387 — — — — — 34,387Fixed assets 1,079,532 526,609 105,038 — — — 1,711,179Construction in progress 219,152 — 510 — — — 219,662Intangible assets 15,110,534 7,018,362 2,299,509 — — — 24,428,405Long-term prepaid expenses 1,524 — — — — — 1,524Deferred tax assets 37,268 — — — — — 37,268

Total Non-current Assets 21,787,935 7,556,201 2,416,287 — — — 31,760,423

TOTAL ASSETS 27,229,983 7,684,028 2,467,210 — — — 37,381,221

— 513 —










Unaudited pro forma




Current Liabilities:Short-term borrowings 3,940,000 1,035,000 615,000 — — — 5,590,000Accounts payable 528,391 29,034 5,632 — — — 563,057Receipts in advance 389,590 69 191 — — — 389,850Employee benefits payable 1,452 2,855 1,786 — — — 6,093Taxes payable 104,780 2,194 923 — — — 107,897Interest payable 142,258 55,235 28,461 — — — 225,954Dividends payable 68,679 — — — — — 68,679Other payables 33,348 52,168 23,850 502,000 662,000 7,498 1,280,864Non-current liabilities due within one year 500,459 499,000 20,000 — — — 1,019,459Other current liabilities 500,000 — — — — — 500,000

Total Current Liabilities 6,208,957 1,675,555 695,843 502,000 662,000 7,498 9,751,853

Non-current Liabilities:Long-term borrowings 269,810 4,561,500 362,000 — — — 5,193,310Deferred tax liabilities 2,341 — — — — — 2,341Bonds payable 494,245 1,200,000 750,000 — — — 2,444,245Other non-current liabilities — 36,470 — — — — 36,470

Total Non-current Liabilities 766,396 5,797,970 1,112,000 — — — 7,676,366

TOTAL LIABILITIES 6,975,353 7,473,525 1,807,843 502,000 662,000 7,498 17,428,219

— 514 —










Unaudited pro forma




Shareholders’ Equity:Share capital 5,037,748 3,328,850 824,170 -3,328,850 -824,170 — 5,037,748Capital reserve 7,565,101 — — 2,826,850 137,845 — 10,529,796Surplus reserve 2,833,298 — — — — — 2,833,298Retained profits 4,299,898 -3,118,347 -164,803 — 24,720 -7,498 1,033,970

Total shareholders’ equity attributable to equity holders of the Company 19,736,045 210,503 659,367 -502,000 -661,605 -7,498 19,434,812

Minority interests 518,585 — — — -395 — 518,190TOTAL SHAREHOLDERS’ EQUITY 20,254,630 210,503 659,367 -502,000 -662,000 -7,498 19,953,002

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 27,229,983 7,684,028 2,467,210 — — — 37,381,221

— 515 —






report dated 30 October 2014. The audited balance sheets of Ningchang Zhenli and Xiyi

Company are extracted from the accountants’ reports of Ningchang Zhenli and Xiyi

Company as at 30 September 2014, respectively as set out in Appendix IIA and Appendix

IIB respectively to this circular.

2. According to the acquisition agreement, the Company has conditionally agreed to acquire

all equity interest in Ningchang Zhenli for a total consideration of RMB502,000,000.

The Unaudited Pro Forma Financial Information has been prepared as if the Ningchang

Zhenli Transaction had taken place on 30 September 2014. The consideration of

RMB502,000,000 is recognized as payable to the shareholder of Ningchang Zhenli as at

30 September 2014 and will be settled within 30 working days after the completion of

Ningchang Zhenli Transaction.

Ningchang Zhenli is currently controlled by the Company’s ultimate shareholder Jiangsu

Communications Holding Company Limited. The Ningchang Zhenli Transaction deemed

as completed on 30 September 2014 is considered as a business combination under

common control because the Company and Ningchang Zhenli were continued to be

ultimately controlled by Jiangsu Communications Holding Company Limited both before

and after the transaction. The acquisition of Ningchang Zhenli is accounted for using the

accounting treatment of business combinations under common control in accordance with

Accounting Standards for Business Enterprise No.20 — Business Combinations issued by

the China Ministry of Finance.




business combination involving enterprises under common control are included in the

Group’s scope of consolidation as if they had been included in the scope of consolidation

from the date when they first came under the common control of the ultimate controlling

party.

— 516 —


The difference between the share capital of Ningchang Zhenli and the carrying amount of

the consideration paid for Ningchang Zhenli Transaction is adjusted to capital reserve as

below.

RMB’000

The share capital of Ningchang Zhenli 3,328,850

Less: Acquisition consideration of Ningchang Zhenli Transaction 502,000

Capital reserve 2,826,850

3. According to the acquisition agreement, Jiangsu Guangjing Xicheng Expressway

Company Limited (“Guangjing Xicheng”), a 85%-owned subsidiary of the Company,

has conditionally agreed to acquire all equity interest in Xiyi Company for a total

consideration of RMB662,000,000. The Unaudited Pro Forma Financial Information has

been prepared as if the Xiyi Company Transaction had taken place on 30 September

2014. The consideration of RMB662,000,000 is recognized as payable to the shareholders

of Xiyi Company as at 30 September 2014 and will be settled within 30 working days

after the completion of Xiyi Company Transaction.

Xiyi Company is currently controlled by the Company’s ultimate shareholder Jiangsu

Communications Holding Company Limited. The Xiyi Company Transaction deemed as

completed on 30 September 2014 is considered as a business combination under common

control because Guangjing Xicheng and Xiyi Company were continued to be ultimately

controlled by Jiangsu Communications Holding Company Limited both before and after

the transaction. The acquisition of Xiyi Company is accounted for using the accounting

treatment of business combinations under common control in accordance with Accounting

Standards for Business Enterprise No.20 — Business Combinations issued by the China

Ministry of Finance.




business combination involving the party being absorbed under merger by absorption are

included in the Group’s scope of consolidation as if they had been included in the scope

of consolidation from the date when they first came under the common control of the

ultimate controlling party.

— 517 —


The difference between the share capital of Xiyi Company and the carrying amount of the

consideration paid for Xiyi Company Transaction is adjusted to capital reserve as below.

RMB’000

The share capital of Xiyi Company 824,170

Less: Acquisition consideration of Xiyi Company Transaction 662,000

162,170

Being allocated to:

Capital reserve 137,845

Minority interests of Guangjing Xicheng 24,325

The accumulated losses of Xiyi Company attributable to the minority interests of

Guangjing Xicheng is as follow.

RMB’000

The accumulated losses of Xiyi Company 164,803

The minority interests in Guangjing Xicheng 15%

The accumulated losses of Xiyi Company attributable to

the minority interests of Guangjing Xicheng 24,720


RMB7,498,000 which would be expensed in profit or loss as if the Transactions had taken

place on 30 September 2014.



— 518 —












related notes as set out on pages 511 to 517 in Appendix VIC of the circular issued by the Company



VIC of the Circular.


proposed acquisition of 江蘇寧常鎮溧高速公路有限公司 (Jiangsu Ningchang Zhenli Expressway

Company Limited, referred to as “Ningchang Zhenli”) and the proposed acquisition of 江蘇錫宜高速公路有限公司 (Jiangsu Xiyi Expressway Company Limited, referred to as “Xiyi Company”)

(collectively as the “Transactions”) on the Group’s financial position as at 30 September 2014 as if

the Transactions had taken place at 30 September 2014. As part of this process, information about the

Group’s financial position has been extracted by the Directors from the Group’s financial statements

for the period ended 30 September 2014, on which no audit or review report has been published.







— 519 —









3420 Assurance Engagements to Report on the Compilation of Pro Forma Financial Information

Included in a Prospectus issued by the HKICPA. This standard requires that the reporting accountant

comply with ethical requirements and plan and perform procedures to obtain reasonable assurance

about whether the Directors have compiled the Pro Forma Financial Information in accordance with

paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the HKICPA.


















— 520 —






Information.


opinion.

Opinion

In our opinion:







Shanghai, China

23 January 2015

— 521 —

APPENDIX VII GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

This Circular, for which the Directors collectively and individually accept full responsibility,

includes particulars given in compliance with the Hong Kong Listing Rules for the purpose

of giving information with regard to the Company. The Directors having made all reasonable

enquiries, confirm that to the best of their knowledge and belief the information contained in

this Circular is accurate and complete in all material respects and not misleading or deceptive,

and there are no other matters the omission of which would make any statement herein or this

Circular misleading.

2. SHARE CAPITAL

Issued share capital

As at the Latest Practicable Date, the issued share capital of the Company was as follows:

RMB

Issued share capital

1,222,000,000 H Shares 1,222,000,000

3,815,747,500 Domestic Shares 3,815,747,500

5,037,747,500

— 522 —


3. DISCLOSURE OF INTERESTS BY DIRECTORS

As at the Latest Practicable Date, no Director or chief executive of the Company had any

interests and short positions in the shares, underlying shares and debentures of the Company and

its associated corporations (within the meaning of Part XV of the SFO) which (a) were required

to be notified to the Company and the Hong Kong Stock Exchange pursuant to Divisions 7

and 8 of Part XV of the SFO (including interests and short positions which they were taken

or deemed to have under such provisions of the SFO) to be entered in the register referred to

therein; or (b) were required, pursuant to Section 352 of the SFO, to be recorded in the register

referred to therein; or (c) were required, pursuant to the Model Code set out in Appendix 10

to the Hong Kong Listing Rules, to be notified to the Company and the Hong Kong Stock

Exchange.

4. DISCLOSURE OF INTEREST UNDER DIVISION 2 AND 3 OF PART XV OF THE

SFO AND SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, so far as is known to the Directors or chief executive of

the Company, the following persons (other than the Directors and the chief executive) had an

interest or short position in the shares and underlying shares of the Company which would fall

to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the

SFO as recorded in the register required to be kept by the Company under Section 336 of the

SFO:

Name Capacity

Direct

Interests

Number of

Shares held

Percentage of

total shares

(H Shares)

Domestic Shares


Holdings Company Ltd.

Others Yes 2,742,578,825 (L) 54.44%

China Merchants Group

Limited/China Merchants

Huajian Highway

Investment Co., Ltd. (1)

Others Yes 589,059,077 (L) 11.69%

— 523 —


Name Capacity

Direct

Interests

Number of

Shares held

Percentage of

total shares

(H Shares)

H Shares

JPMorgan Chase & Co. Interest of controlled

corporation

No 111,361,932 (L) 2.21%

(9.11%)

5,013,000 (S) 0.1%

(0.41%)

68,846,470 (P) 1.4%

(5.63%)

Mondrian Investment

Partners Limited

Investment manager No 110,350,000 (L) 2.2%

(9.03%)

Blackrock, Inc. Interest of controlled

corporation

No 103,281,430 (L) 2.1%

(8.45%)

Commonwealth Bank

of Australia

Interest of controlled

corporation

No 61,519,000 (L) 1.22%

(5.03%)

Notes: (L) Long position; (S) Short position; (P) Lending pool

(1) China Merchants Group Limited was deemed to hold interests by virtue of its controlling interests in China Merchants Huajian Highway Investment Co., Ltd.

Save as disclosed above, as at the Latest Practicable Date, no person had an interest or short

position in the shares and underlying shares of the Company as recorded in the register required

to be kept by the Company pursuant to Section 336 of the SFO.

As at the Latest Practicable Date, save for Mr. Qian Yong Xiang, Chen Xiang Hui and Du Wen

Yi, who were also directors of Communication Holdings, so far as is known to the Directors,

none of the other Directors held offices in the substantial Shareholders set out above.

— 524 —


5. SUBSTANTIAL SHAREHOLDER(S) OF OTHER MEMBERS OF THE GROUP

As at the Latest Practicable Date, to the best of the Directors’ knowledge, information and

belief, the following person(s) is/are, directly or indirectly, interested in 10 per cent or more of

the nominal value of any class of share capital (including any options in respect of such capital)

carrying rights to vote in all circumstances at general meetings of the members of the Group:

Name of subsidiary Name of beneficial owner

Name of

registered holder

Percentage of nominal

value of issued capital/

registered capital held

Jiangsu Guangjing Xicheng


China Merchants

Group Limited

China Merchants

Huajian Highway

Investment Co., Ltd.

15%

Save as disclosed above, as at the Latest Practicable Date, no person had an interest or short

position in the shares and underlying shares of the Company as recorded in the register required

to be kept by the Company pursuant to Section 336 of the SFO or, so far as is known to the

Director or chief executive of the Company, who was, directly or indirectly, interested in 10

per cent or more of the nominal value of any class of share capital carrying rights to vote in

all circumstances at general meetings of any other members of the Group (including options in

respect of such capital).

6. SERVICE CONTRACT

Apart from the service contract between the Company and the executive Director, each of the

other Directors and supervisors has entered into an appointment letter with the Company. The

content of these contracts was primarily the same in all material respects. The term of these

contracts commenced from the date of the 2012 annual general meeting (or the appointment

date) until the date of the 2014 annual general meeting. The Company, the Directors or the

supervisors can terminate the contracts by giving not less than three months prior notice in

writing to the other party. Save as the abovementioned, none of the Directors had entered,

or proposed to enter into a service contract with any member of the Group which would not

determinable by the Group within one year without payment of compensation, other than

statutory compensation. The Company was not required to pay compensation to any Director

for the reason that the Directors intended to be re-elected in the next annual general meeting but

their service contracts have not expired.

— 525 —


7. LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in any litigation or

claims of material importance nor was any litigation or claims of material importance known to

the Directors to be pending or threatened against any member of the Group.

8. DIRECTORS’ INTERESTS IN COMPETING BUSINESS

As at the Latest Practicable Date, none of the Directors or their respective close associates (as

defined under the Hong Kong Listing Rules) had any interest in businesses, which would be

considered to compete or would likely to compete, either directly or indirectly, with the business

of the Group as required to be disclosed pursuant to the Hong Kong Listing Rules.

9. DIRECTORS’ INTERESTS IN THE GROUP’S ASSETS CONTRACTS

Save as disclosed in this circular, as at the Latest Practicable Date, none of the Directors of the

Company had any interest in any assets which had been since 31 December 2013 (being the

date to which the latest published audited accounts of the Company were made up) acquired

or disposed of by or leased to any member of the Group, or were proposed to be acquired or

disposed of by or leased to any member of the Group. As at the Latest Practicable Date, none

of the Directors was materially interested in any contract or arrangement subsisting at the Latest

Practicable Date which would be significant in relation to the business of the Group.

10. QUALIFICATIONS AND CONSENTS OF EXPERTS

The qualifications of the experts who have given opinion or advice contained in this circular are

set out as follows:

Name Qualifications

American Appraisal China Limited Independent valuer

Deloitte Touche Tohmatsu Certified

Public Accountants LLP

Certified Public Accountants

— 526 —


Guotai Junan Capital Limited a licensed corporation authorised to conduct Type 6

(advising on corporate finance) regulated activities under

SFO

Jiangsu Weixin Engineering

Consultants Ltd.

Traffic consultant

As at the date of this circular, each of the above experts has given and has not withdrawn its

written consent to the issue of this circular with the inclusion of their letters and reference to

their names and opinions in the form and context in which they appear in this circular.

As at the Latest Practicable Date, each of the above experts did not have any shareholding in

any member of the Group or the right (whether legally enforceable or not) to subscribe for or to

nominate persons to subscribe for securities in any member of the Group.

None of the above experts had any interest in any assets which had been since 31 December

2013 (being the date to which the latest published audited accounts of the Company were made

up) acquired of by or leased to any member of the Group, or were proposed to be acquired or

disposed of by or leased to any member of the Group.

11. MATERIAL CONTRACTS

No contract (other than those entered into in the ordinary course of business) has been entered

into by members of the Group within the two years immediately preceding the date of this

circular and are or may be material.

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the office of Reed Smith

Richards Butler at 20/F, Alexandra House, 18 Chater Road, Central, Hong Kong during normal

business hours on any business day from the date of this circular until 6 February 2015:

(a) the Articles of Association of the Company;

(b) the annual reports of the Company for the two years ended 31 December 2013;

(c) the Ningchang Zhenli Equity Transfer Agreement entered into between the Company and

Communications Holdings in respect of the acquisition of the entire equity interest of

Ningchang Zhenli;

— 527 —


(d) the Debt Transfer Agreement entered into between the Company and Ningchang Zhenli;

(e) the Xiyi Company Equity Transfer Agreements entered into between Guangjing Xicheng (a

subsidiary of the Company) and Communications Holdings, Changzhou Expressway and

Wuxi Expressway, respectively, in respect of the acquisition of the entire equity interest

of Xiyi Company;

(f) the Absorption and Merger Agreement entered into between Guangjing Xicheng (a

subsidiary of the Company) and Xiyi Company;

(g) the Profit Compensation Agreement entered into between the Company and

Communications Holdings in respect of the acquisition of the entire equity interest of

Ningchang Zhenli;

(h) the letter from the Independent Financial Adviser as set out this circular;

(i) the letter from the Independent Board Committee as set out this circular;

(j) the written consent of the experts as referred to in the paragraph headed “10.

Qualifications and consents of experts” in this appendix;

(k) the accountant’s report on Ningchang Zhenli as set out in this circular;

(l) the accountant’s report on Xiyi Company as set out in this circular;

(m) the valuation report in respect of Ningchang Zhenli as set out in this circular;

(n) the accountants’ report on profit forecast on the valuation of Ningchang Zhenli as set out

this circular;

(o) the valuation report in respect of Xiyi Company as set out in this circular;

(p) the accountants’ report on profit forecast on the valuation of Xiyi Company as set out this

circular;

(q) the traffic consultant’s report issued by Jiangsu Weixin in respect of Ningchang Zhenli;

(r) the traffic consultant’s report issued by Jiangsu Weixin in respect of Xiyi Company;

— 528 —


(s) the reports on the unaudited pro forma financial information as set out in this circular;

and

(t) this circular.

13. MISCELLANEOUS

(a) The registered office of the Company is at 6 Xianlin Avenue, Qixia District, Nanjing,

Jiangsu, the PRC.

(b) The registrar and transfer office of H Shares of the company is Hong Kong Registrars

Limited, Shops 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan

Chai, Hong Kong.

(c) The company secretary of the Company is Mr. Yao Yong Jia. Mr. Yao joined the

Company in August 1992. He has been Section Chief of the Jiangsu Provincial

Communications Planning and Design Institute, the Jiangsu Expressways Command

Office and the Securities Department, as well as Director of the Secretariat to the Board

of the Company. Mr. Yao has professional experience and has been engaging in project

management, investment analysis, financing and securities.

(d) In the event of any inconsistency, the Chinese text of the traffic consultant’s reports

contained in this circular shall prevail over the English text.

— 529 —

NOTICE OF THE EXTRAORDINARY GENERAL MEETING



NOTICE OF 2015 FIRST EXTRAORDINARY GENERAL MEETING

Important Notice:

• Date of convening the EGM: 12 March 2015.

• Online voting platform will be provided to all A Share holders of the Company in this EGM,

the voting system adopted by the EGM: online voting system for general meetings of listed

companies through The Shanghai Stock Exchange (the “Shanghai Stock Exchange”)/internet

voting platform (website: vote.sseinfo.com).

• Due to the upgrading of the online voting system of the Shanghai Stock Exchange, the relevant

data in respect of this notice cannot be collected. The Company will issue a supplemental notice

to all A Share holders when the new system of the Shanghai Stock Exchange is launched on 26

January.

NOTICE IS HEREBY GIVEN that the 2015 First Extraordinary General Meeting (the “EGM”)

of Jiangsu Expressway Company Limited (the “Company”) convened by the board of directors of

the Company will be held on Thursday, 12 March 2015 at 2:30 p.m. at the Conference Room of the

Company at 6 Xianlin Avenue, Nanjing, Jiangsu, the People’s Republic of China. Capitalised terms

used in this notice shall have the same meanings as those defined in the circular of the Company

issued on 23 January 2015, unless the context otherwise requires. Please note the following:

I. INFORMATION OF THE EGM

• Session: 2015 First EGM

• Convener: the board of directors of the Company

• Voting method: the voting method adopted for the EGM is a combination of on-site

voting and online voting

— 530 —


• Date, time and venue of the on-site meeting:

1. The commencement time of the on-site meeting: 2:30 p.m. on 12 March 2015

2. Venue: 6 Xianlin Avenue, Nanjing, Jiangsu, the People’s Republic of China

• The online voting system and the time for online voting:

Online voting system: online voting system for general meetings of listed companies

through the Shanghai Stock Exchange/internet voting platform (website: vote.sseinfo.

com).

Time for on-line voting: from 9:15 a.m. on 12 March 2015 to 3:00 p.m. on 12 March

2015

The time for online voting by A Share holders through the online voting system of the

Shanghai Stock Exchange shall be from 9:15 a.m. to 9:25 a.m., from 9:30 a.m. to 11:30

a.m., and from 1:00 p.m. to 3:00 p.m. of 12 March 2015; whereas the time for voting

through the internet voting platform shall be from 9:15 a.m. to 3:00 p.m. on the day of

convening of the general meeting.

• The securities of the Company are not subject to margin trading, short selling,

refinancing and agreed repurchase#.

# refers to the margin trading, short selling, refinancing and agreed repurchase activities under the “Pilot Measures for Supervision and Administration of Refinancing Business”

• investors of the Company participating through Northbound Trading should vote in accordance with the requirements of the relevant regulations, including the Implementing Rules of Shanghai Stock Exchange for the Online Voting at General Meetings of Listed Companies (《上海證券交易所上市公司股東大會網絡投票實施細則》).

II. MATTERS TO BE CONSIDERED AT THE EGM

The following matters shall be considered at the general meeting:

ORDINARY RESOLUTIONS

1. To approve the Resolution in respect of the acquisition of the entire equity interest

in Jiangsu Ningchang Zhenli Expressway Company Limited by Jiangsu Expressway

Company Limited together with the transfer of all the debts of Jiangsu Ningchang Zhenli

Expressway Company Limited and the capitalization of such debts into equity, and to

authorise Mr. Qian Yong Xiang, a director of the Company, to deal with the matters

related thereto.

— 531 —


2. To approve the Resolution in respect of the merger and absorption of Jiangsu Xiyi

Expressway Company Limited by Jiangsu Guangjing Xicheng Expressway Company

Limited, and to authorise Mr. Qian Yong Xiang, a director of the Company, to deal with

the matters related thereto.

For details of the above-mentioned resolutions, a circular and a notice will be despatched in

Hong Kong by the Company in compliance with the requirements of the Rules Governing the

Listing of Securities of The Stock Exchange of Hong Kong Limited. For details, please refer to

the website of The Stock Exchange of Hong Kong Limited (www.hkexnews.hk). For notice of

the EGM for A shareholders of the Company, please refer to the announcement of the Company

dated 23 January 2013 published in China Securities Journal, Shanghai Securities News,

the Shanghai Stock Exchange’s website (www.sse.com.cn) and the Company’s website

(www.jsexpressway.com).

III. MATTERS TO NOTE AT THE EGM

1. A Share holders exercising voting rights through the Shanghai Stock Exchange’s online

voting system for general meetings of could vote through the trading system (via the

trading terminals of designated security house), or through logging in the internet

voting platform (website: vote.sseinfo.com). In respect of those first time users of the

internet voting platform, the relevant Investors will be requested to verify their capacity

as shareholders. Please refer to the detailed description as set out in the website of the

internet voting platform.

2. In the event where shareholders voted in excess of their entitled number of votes, or that

they have voted in respect of extra candidates in a margin election, the votes casted in

respect of the relevant resolutions shall be deemed invalided.

3. The first votes casted shall prevail in respect of votes casted repeatedly through on-site

voting, online voting or otherwise.

IV. ATTENDEES OF THE MEETING

1. Shareholders of the Company who are registered with the Shanghai Branch of China

Securities Depository & Clearing Corporation Limited or the Caochangmen Outlet of

Huatai Securities Co., Ltd. (the former Jiangsu Securities Depository Company (江蘇證券登記公司)) as at the close of trading of the afternoon session on 9 February 2015,

and shareholders holding the H Shares of the Company who are registered with the Hong

Kong Registrars Limited as at 4:30 p.m. on 9 February 2015 are entitled to attend the

EGM and to appoint a proxy in writing to attend the meeting and vote on their behalf,

Such proxy need not be a shareholder of the Company.

— 532 —


2. Directors, supervisors and senior management of the Company, the auditors of the

Company and lawyers acting scrutineers.

3. The registration arrangement for on-site voting:

(a) Venue of registration: 6 Xianlin Avenue, Nanjing.

(b) Time for registration: 1:30 p.m. to 2:30 p.m. on 12 March 2015. No registration in

respect of shareholder’s attendance of the meeting will be made after 2:30 p.m.

(c) Shareholders or their proxy should make available their identity documents when

attending the meeting.

V. REGISTRATION FOR ATTENDANCE OF MEETING

1. Shareholders of the Company who are registered with the Shanghai Branch of China

Securities Depository & Clearing Corporation Limited or the Caochangmen Outlet of

Huatai Securities Co., Ltd. (the former Jiangsu Securities Depository Company (江蘇證券登記公司)) as at the close of trading of the afternoon session on 9 February 2015,

and shareholders holding the H Shares of the Company who are registered with the Hong

Kong Registrars Limited as at 4:30 p.m. on 9 February 2015 are entitled to attend the

EGM, provided that such shareholders shall complete and return the confirmation slip to

the Company before 19 February 2015. Further details are set out in the confirmation slip

and explanation thereto.

2. Registration of transfers of H shares will be suspended by the Company from 10 February

2015 to 12 March 2015 (both days inclusive). Holders of H shares who wish to be

eligible to attend the EGM must deliver their instruments of transfer together with the

relevant share certificates to Hong Kong Registrars Limited, the Registrar of H shares of

the Company, at Shop 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East,

Wan Chai, Hong Kong, no later than 4:30 p.m. on 9 February 2015.

3. A shareholder who has the right to attend and vote at the EGM is entitled to appoint a

proxy (whether or not a member) to attend and vote on his/her behalf. A shareholder (or

his/her proxy) is entitled to cast one vote for each share he holds or represents. Upon

completion and delivery of the form of proxy, a shareholder (or his/her proxy) may

attend and vote at the EGM. Nevertheless, the appointment of the proxy will be deemed

to have been revoked by the shareholder. Domestic shareholders (or his/her proxy) shall

present his/her shareholder account number to attend the meeting. Corporate domestic

shareholders shall present its shareholding confirmation if its shareholder account had not

been changed yet.

— 533 —


4. The instrument appointing a proxy must be in writing under the hand of the shareholder

or his/her attorney duly authorised in writing. In the event that such instrument is signed

by an attorney of the shareholder, an authorisation that authorised such signatory shall be

notarised. To be valid, such notarised authorisation together with the form of proxy must

be delivered to the Secretary’s Office not less than 24 hours before the time appointed for

holding the EGM.

By Order of the Board of Directors

Yao Yong Jia

Secretary to the Board of Directors

Nanjing, the PRC

23 January 2015

Note:

1. The EGM will last for half day. Shareholders attending the EGM will be responsible for their own accommodation and travelling expenses.

2. Contact Address : Secretariat Office of the Board, 6 Xianlin Avenue, Nanjing, Jiangsu, the PRCPostal Code : 210049Tel : (86) 25-84362700 ext. 301835, 301837 or (86) 25-84464303Fax : (86) 25-84466643, (86) 25-84207788

3. Address of Hong Kong Registrars Limited (the Registrar of H shares of the Company): Shop 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong.

4. All resolutions shall be passed by way of poll.

5. The form of proxy for use at the EGM has been despatched to shareholders with the circular dated 23 January 2015.

Documents

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