2009 – 2010 Annual Report

Hopewell Highway Infrastructure Limited Hopewell Highway Infrastructure Limited Room 63-02, 63rd Floor, Hopewell Centre 183 Queen’s Road East, Wanchai Stock Code: 737 Hong Kong Strategic Expressway Network Tel : (852) 2528 4975 Fax : (852) 2861 0177 Facilitates Regional Integration Website : www.hopewellhighway.com Our strategically located expressways have been serving as the major artery in the Pearl River Delta (“PRD”) highway Annual Report 2009-2010 network over the years. Looking ahead, the Western Delta Route will become the only expressway linking up Guangzhou, Foshan, Zhongshan and Zhuhai as well as the most direct expressway leading to Macau upon the completion of Phase III West. Its full operation will therefore not only expand our toll expressways to around 220 km, but also significantly strengthen the competitive position of our expressway network. With our strong financial position, we will continue to seek investment opportunities in the PRD and beyond to deliver steady and attractive returns to our shareholders while offering quality 2009-2010 services to road users. Annual Report HHI Projects 1 Guangzhou-Shenzhen Superhighway A 122.8 km closed system asphalt-paved expressway with a total of six lanes in dual directions running between Huanggang in Shenzhen and Guangdan in Guangzhou where it connects to the Guangzhou Ring Road. 2 2 Phase I of the Western Delta Route A 14.7 km closed system asphalt-paved express- 1 way with a total of six lanes in dual directions linking Guangzhou to Shunde. It connects with Guangzhou East-South-West Ring Road to the north, and National Highway 105 and Bigui Road in Shunde to the south. 3 3 Phase II of the Western Delta Route A 45.5 km closed system asphalt-paved expressway with a total of six lanes in dual directions linking Shunde 4 to Zhongshan. It connects with Phase I West to the north, and National Highway 105 and Xiaolan Highway (currently under construction) in Zhongshan to the south. 4 Phase III of the Western Delta Route (Under construction) Transportation Infrastructure: An approximately 38 km closed system asphalt-paved 1 Guangzhou-Shenzhen Superhighway expressway with a total of six lanes in dual directions, 2 Phase I of the Western Delta Route which connects with Phase II West to the north and the 3 Phase II of the Western Delta Route highway network in Zhuhai to the south. 4 Phase III of the Western Delta Route (under construction) Vite Limited Design and Printed by TOPPAN Hopewell Highway Infrastructure Limited Annual Report 2009-2010 Contents Hopewell Highway Infrastructure Limited (“HHI”) (stock code: 737), listed on the Stock Exchange of Hong Kong since August 2003, builds and operates strategic expressway infrastructure in Guangdong Province. With the strong support and well- established experience of its listed parent, Hopewell Holdings Limited (stock code: 54), HHI focuses on the initiation, promotion, development, investment and operation of toll expressways and bridges, particularly in the thriving Pearl River Delta region. 02 Financial Highlights 03 5-Year Financial Summary 04 Chairman’s Statement 10 Profile of Directors 16 Management Discussion and Analysis 16 Business Review 38 Financial Review 44 Others 46 Corporate Governance Report 53 Report of the Directors 64 Independent Auditor’s Report 65 Financial Report 66 Consolidated Statement of Comprehensive Income 67 Consolidated Statement of Financial Position 68 Company Statement of Financial Position 69 Consolidated Statement of Changes in Equity 70 Consolidated Statement of Cash Flows 71 Notes to the Consolidated Financial Statements 117 Glossary 119 Corporate Information 120 Financial Calendar 1 Hopewell Highway Infrastructure Limited Annual Report 2009-2010 Financial Highlights Annual Toll Revenue by Expressway Total Trafﬁc by Expressway 4.3% 0.1% 8.2% 0.1% 95.6% 91.7% GS Superhighway Phase I West Phase II West GS Superhighway Phase I West Phase II West Net Toll Revenue Earnings before Interest and Tax Proﬁt Attributable to Owners of the Company (HK$ million) (HK$ million) (HK$ million) 2,400 3,000 2,500 2,737(1) 2,000 1,940 2,500 2,014 1,809 2,000 1,717 1,600 2,000 1,500 1,426 1,200 1,500 1,337 1,059 1,000 956 800 1,000 500 400 500 0 0 0 2008 2009 2010 2008 2009 2010 2008 2009 2010 Interest Coverage Total Debt to Total Assets Gearing Ratio (EBITDA/Interest) (Net Debt(2) to Equity Attributable to the Owners of the Company) 25 23.2x 45 50 40% 40 37% 43% 20 35 40 29% 30 30% 15 30 12.1x 25 10.7x 20 10 20 15 5 10 10 5 0 0 0 0% 2008 2009 2010 2008 2009 2010 2008 2009 2010 Notes: (1) Including pre-tax disposal gain of ESW Ring Road HK$974 million. (2) Total debt less bank balances and cash, pledged bank balances and deposits. A zero balance of net debt represented that the bank balance and cash together with pledged bank balances and deposits exceeded total debt as at the reporting date. 2 Hopewell Highway Infrastructure Limited Annual Report 2009-2010 5-Year Financial Summary Consolidated Results Year ended 30 June (in HK$ million) 2006 2007 2008 2009 2010 Net toll revenue 1,735 2,026 1,717 1,809 1,940 Profit before tax 1,281 1,552 2,485 1,264 1,264 Income tax expenses (117) (162) (452) (187) (291) Profit for the year 1,164 1,390 2,033 1,077 973 Profit for the year attributable to: Owners of the Company 1,143 1,365 2,014 1,059 956 Non-controlling interests 21 25 19 18 17 Profit for the year 1,164 1,390 2,033 1,077 973 Consolidated Statement of Financial Position As at 30 June (in HK$ million) 2006 2007 2008 2009 2010 Property and equipment 98 157 184 189 307 Concession intangible assets 11,053 11,767 10,362 11,280 12,574 Balances with jointly controlled entities 1,167 806 530 141 177 Current assets 3,589 4,550 6,347 2,978 3,035 Total assets 15,907 17,280 17,423 14,588 16,093 Current liabilities (529) (632) (686) (796) (1,945) Non-current liabilities (5,189) (5,848) (5,137) (5,403) (5,796) Total liabilities (5,718) (6,480) (5,823) (6,199) (7,741) Non-controlling interests (36) (44) (50) (48) (52) Equity attributable to owners of the Company 10,153 10,756 11,550 8,341 8,300 Per Share Basis 2006 2007 2008 2009 2010 Basic earnings per share (HK cents) 39.34 45.98 67.81 35.72 32.28 Dividend per share (HK cents) — Interim 11.5 15.0 17.0 17.0 17.0 — Final 17.0 20.0 13.0 18.0 15.0 — Special —— 35.0 84.0 – Net asset value per share (HK$) 3.5 3.6 3.9 2.8 2.8 Financial Ratios 2006 2007 2008 2009 2010 Gearing ratio (Net debt(1) to equity attributable to owners of the Company) 18% 14% 0% 30% 43% Return on equity attributable to owners of the Company 11% 13% 17% 13% 12% Dividend payout ratio 75% 77% 97% 98%(2) 99% Notes: (1) Net debt is defined as total debt (including bank and other loans of jointly controlled entities and balances with joint venture partners) less bank balances and cash, and pledged bank balances and deposits of jointly controlled entities. A zero balance of net debt represented that the bank balances and cash together with pledged bank balances and deposits exceeded total debt as at the reporting date. (2) Excluding extraordinary special dividend of HK84 cents per share. 3 Hopewell Highway Infrastructure Limited Annual Report 2009-2010 Chairman’s Statement “ In view of the rapid urbanization, fast growing economic and transportation of the western bank of the PRD, the Group believes that the Western Delta Route will serve as a platform for the long-term growth of its toll road business.” I am pleased to report the results of Hopewell Highway Infrastructure Limited and its subsidiaries (the “Group”) for the year ended 30 June 2010. The Group’s net toll revenue increased by 7% to HK$1,940 million as compared to last year. Profit attributable to owners of the Company decreased by 10% from HK$1,059 million of last year to HK$956 million. This slip in profit was mainly attributable to the drop in interest income from bank deposits coupled with the significant step-up of the applicable PRC Enterprise Income Tax rate from year 2010 onwards. The basic earnings per share for the year decreased by 10% from last year’s HK35.72 cents per share to HK32.28 cents. During the year under review, the strong growth in private car ownership resulted from the increasing purchasing power in Guangdong led to a strong traffic and toll revenue growth of Class 1 small cars on GS Superhighway and Phase I West. In respect of GS Superhighway, both traffic and toll revenue from Class 1 small cars reached a record high level, while that from Classes 4 and 5 commercial vehicles (mainly trucks) strongly rebounded from the trough in early 2009. GS Superhighway and Phase I West continued to provide stable recurring profit and cash inflow to the Group. 4 Hopewell Highway Infrastructure Limited Annual Report 2009-2010 Chairman’s Statement Phase II West opened on 25 June 2010 as scheduled, creating synergy with Phase I West and increasing the Group’s total length of operating toll expressways to around 180 km. Phase I West and Phase II West, with a combined length of about 61 km, altogether form a major expressway linking Guangzhou with downtown Zhongshan.

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