China Merchant English Low

COMMITMENT
TO GROWTH
ANNUAL REPOR T 2010
GROWTH
China Merchants Holdings (Pacific) Limited
CONTENTS
2 Corporate Prole 3 Corporate Information 6 Chairmans Statement 8 CEOs Message 14 Board of Directors 16 Key Executive Ofcers 18 Financial Highlights 20 Corporate Governance 26 Financial Report 80 Statistics of Shareholders 82 Notice of Annual General Meeting Proxy Form
CORPORATE PROFILE
The Company was incorporated in Singapore as a private limited company under the name Hotel Tai-Pan Pte Ltd on 27 March 1981 and was converted to a public limited company on 11 May 1981. The Company was ofcially listed on the main board of the Singapore Exchange Securities Trading Limited (SGX-ST) on 17 August 1981. Upon the sale in 1989 of its agship hotel, then known as Tai-Pan Ramada Hotel, the Company changed its name to HTP Holdings Limited. China Everbright Holdings Co. Ltd took over the control of the Company in August 1993 and the Companys name was changed to China Everbright Pacic Limited. In May 2001, China Merchants Holdings (International) Company Limited (CMHI) acquired a 23.9% stake in the Company from China Everbright Holdings Co. Ltd and became the single largest shareholder of the Company. The Company further changed its name to China Merchants Holdings (Pacic) Limited so as to directly identify the Companys strong ties with the China Merchants Group. The issued and paid up share capital of the Company On 30 December 2004, the Company was transformed into a signicant toll road player following the acquisition of equity interests in ve toll roads in China from CMHI. The Company comprises 718 million ordinary shares and 136 million redeemable convertible preference shares (RCPS). Currently, Huajian Transportation Economic Development Center (HTEDC) is the holding company with an equity stake of 82.5% of the issued shares in the capital of the Company. HTEDC, a wholly-owned subsidiary of China Merchants Group Limited, is one of the largest enterprises in China engaging in toll road investment and management. HTEDC manages a portfolio comprising investment in more than 20 expressways and bridges with an aggregate length of 5,000 km. is now one of the leading toll road operators in China and is the largest toll road company listed on the SGX-ST. Currently, the Company invests in and operates three toll roads in China. The three toll roads totalled approximately 274 kilometres and are located in Guangxi Zhuang Autonomous Region, Guizhou province and Zhejiang province in the PRC. These roads are sited on routes connecting destinations that provide trafc growth opportunities. Besides the core business in toll road operations, the Company is also involved in property development in New Zealand.
The corporate structure of the Group is as follows:

Guiliu Expressway PRC)
82.5%
Huajian Transportation Economic Development Centre
40% (Guangxi Zhuang Autonomous Region,

Yuyao Highway
Toll Road Business
60% (Zhejiang Province, PRC)

Guihuang Highway
CHINA MERCHANTS HOLDINGS (PACIFIC) LIMITED
60% (Guizhou Province, PRC)

Universal Homes Limited
100% (Auckland, New Zealand)

Other Companies Other Businesses
100% (New Zealand & PRC)
17.5%
Other Shareholders
ANNUAL REPORT 2010 CHINA MERCHANTS HOLDINGS (PACIFIC) LIMITED
CORPORATE INFORMATION
Directors
Mr Dong Xue Bo (Non-executive Chairman) Mr Zheng Hai Jun (Non-executive Vice Chairman) Mr Jiang Yan Fei (Vice Chairman & Chief Executive Ofcer) Mr Wu Xin Hua (Executive Director & Chief Operating Ofcer) Dr Lim Heng Kow (Independent Director) Dr Hong Hai (Independent Director)
Corporate Ofce
8 Temasek Boulevard #38-01 Suntec Tower Three Singapore 038988 Tel: 6836 0200 Fax: 6836 4776
Share Registrar
Boardroom Corporate & Advisory Services Pte. Ltd. 50 Rafes Place #32-01 Singapore Land Tower Singapore 048623 Tel: 6536 5355 Fax: 6536 1360
Audit Committee
Dr Lim Heng Kow (Chairman) Mr Dong Xue Bo Dr Hong Hai
Nominating Committee
Dr Lim Heng Kow (Chairman) Mr Dong Xue Bo Dr Hong Hai
Auditors
Deloitte & Touche LLP Public Accountants and Certied Public Accountants 6 Shenton Way #32-00 DBS Building Tower Two Singapore 068809 Partner-in-charge: Ms Ng Peck Hoon (from 2010)
Remuneration Committee
Dr Hong Hai (Chairman) Mr Jiang Yan Fei Dr Lim Heng Kow
Company Secretaries
Ms Lim Lay Hoon Ms Lai Foon Kuen
Registered Ofce
50 Rafes Place #32-01 Singapore Land Tower Singapore 048623 Tel: 6536 5355 Fax: 6536 1360
CHINA MERCHANTS HOLDINGS (PACIFIC) LIMITED ANNUAL REPORT 2010
COMMITMENT
TO GROWTH
Our Vision is to be... a leading player in the toll road industry in China
CHAIRMANS STATEMENT
Dear Shareholders,
As the global economy improved in 2010, we forged ahead with a renewed focus on acquisitions to further strengthen and expand our toll road business in China. We have consistently adopted a growth strategy of expanding our business and earnings base through both organic expansion and selective acquisitions, in particular, expressways located in the PRC. To support such growth strategy, the Group has built up a strong nancial position with a cash balance of approximately HK$1.3 billion as at 31 December 2010 and signicant debt capacity. We therefore believe that we have the nancial capacity and exibility to pursue investment opportunities with a view to bringing long-term, strategic benets to the CMHP Group. In August 2010, as part of our long-term growth strategy, our wholly-owned subsidiary, China Merchants Pacic (Shenzhen) Investment Co., Ltd entered into a conditional sale and purchase agreement with our ultimate holding company, China Merchants Group Limited (CMG), to acquire CMGs 51% equity interest in Zhejiang Wenzhou Yongtaiwen Expressway Co., Ltd (Yongtaiwen Expressway Co) for a total consideration of RMB2.23 billion (approximately HK$2.56 billion). Yongtaiwen Expressway Co owns and operates the Wenzhou Yongtaiwen Expressway (Wenzhou Section) (the Yongtaiwen Expressway) located in Zhejiang province in the Peoples Republic of China. It is a dual-2, four-lane carriageway with a total length of approximately 138 km. The acquisition of Yongtaiwen
into the Wenzhou region of the prosperous coastal Zhejiang province. Having obtained our shareholders approval in October 2010, we are still in the process of obtaining the PRC regulatory approvals. The acquisition of Yongtaiwen Expressway, when completed, is immediately accretive to the Groups earnings.
Review of Results
For the nancial year ended 31 December 2010, the Group posted a revenue to HK$130.6 million, a decrease of 38% over the corresponding period. The property development and others business segment which accounted for 92% of the total Group revenue, registered a decline in revenue due mainly to a drop in settlement numbers of development properties as a result of slower sales compared to last year. The Groups pre-tax prot rose 38% to HK$281 million from HK$203.2 million a year ago. Net prot after tax was HK$267.4 million, a 37% growth over the previous nancial year. The 38% increase in pre-tax prot included an exceptional gain of HK$41.3 million from the disposal of the Groups entire interest in Luomei Highway in January 2010. Excluding an impairment charge of HK$168 million (the impairment charge was an investment write down in the Groups 60%-owned Yuyao Highway) incurred in FY2009, the Groups pre-tax prot would have declined by 35%, impacted by the reduction in prot/cash sharing ratio from 90% to 40% with effect from 1 January 2010 of our major toll road asset, the Guiliu Expressway. The Groups property development business
continued to be adversely affected by challenging market conditions in New Zealand. The property p p y development and others business segment as a whole posted a higher pre-tax loss of HK$19.0 million for the year under review compared to a loss of HK$10.1 million a year ago largely due to lower gross prot from sales of development properties, higher administrative expenses, partially offset by higher foreign exchange gain and bank interest income.
Expressway will further diversify and enlarge CMHPs toll road portfolio, as well as expand its geographical coverage
AN UAL REPORT ANNUAL REPOR 2010 CHIN MERCHANTS HO DINGS (PACIFIC LIMITED ANNUAL REPORT 2010 CHINA MERCHANTS HOLDINGS (PACIFIC) LIMITED NNUAL A POR ORT O CHINA MERCHANTS HOLDIN HINA ERC AN HOLDINGS (PACIF C) LIMITED OL I (PACIFIC) MIT P I
The Groups balance sheet has strengthened. As at 31 December 2010, its cash and cash equivalents stood at about HK$1.3 billion, up 27% compared to last year. Net asset value per share rose from HK$4.59 as at 31 December
an expanded network. The acquisition, when concluded, will mark a great step forward in our development and will allow us to accelerate growth and further strengthen our position in the toll road industry. The acquisition of Yongtaiwen Expressway from CMG has also demonstrated the strong support given by the China Merchants Group to help the Group grow its toll road business. Going forward, the China Merchants Group would continue to play a vital role in the Groups development. With the China Merchants Groups extensive connections and vast investments in the toll road industry in China, we believe that the Group is advantageously positioned to seek further expansionary growth in China.
2009 to HK$4.62 as at 31 December 2010. The toll road operations continued to generate robust cash ows. Free cash ow for the year was HK$345 million. The Company intends to use our existing cash resources to partly nance the acquisition of Yongtaiwen Expressway.
Dividends
The acquisition of the 51% stake in Yongtaiwen Expressway Co from CMG represents a major strategic investment of the Company to strengthen its future earnings base. Taking into consideration the cash requirement for the acquisition, the Board is recommending a nal tax exempt (one-tier) dividend of 2.0 Singapore cents per share, unchanged from last year. Including the interim dividend of 2.0 Singapore cents per share, the total dividend for the year would amount to 4.0 Singapore cents or a dividend payout ratio of 67% for the nancial year ended 31 December 2010.
Appreciation
In closing, let me record my appreciation to the management team and staff of our Group for their hard work and contributions, and our business partners, associates and shareholders for their continuing support. I would also like to express my thanks to fellow directors for the wise counsel and guidance provided to the Group.
The Road Ahead

We are optimistic about the toll road industry in China. The trafc volume and toll revenue registered by our toll roads grew in 2010 as Chinas economy remained strong with a 10.3% GDP growth rate. The overall toll road industry outlook remains positive and the strong GDP forecast for Chinas economy in 2011 should continue to underpin our roads trafc and toll revenue growth. The operating environment in New Zealand is expected to remain weak and downward pressure on house prices may remain for the next 12 months. The acquisition of Yongtaiwen Expressway is in line with the Groups growth strategy of further expanding its toll road network in China to capture a greater share of the growing expressway trafc and to derive an additional synergy from Dong Xue Bo Chairman I look forward to your continued support as we invest to build the future for all our stakeholders. We are pleased to welcome on Board Mr Zheng Hai Jun and Mr Wu Xin Hua and look forward to their contributions to the Company. Mr Yan Cheng Da and Ms Tsui Suet Lai Linda stepped down from the Board in February 2011. On behalf of the Board, I would like to convey our heartfelt appreciation to them for their invaluable contributions during their period of ofce.
We are optimistic about the toll road industry in China. The

trafc volume and toll revenue registered by our toll roads grew in 2010 as Chinas economy remained strong with a 10.3% GDP growth rate. The overall toll road industry outlook remains positive and the strong GDP forecast for Chinas economy in 2011 should continue to underpin our roads trafc and toll revenue growth.
7
CEOS MESSAGE
A s the Group enters its next phase of growth, we will

accelerate our growth strategies and enhance shareholder value for the long term.
Dear Shareholders,
The year 2010 was signicant in that the Company took a further step towards realising our vision of being a leading player in the toll road industry in China. In an effort to expand our footprint in China, the Company, in August 2010, announced the proposed investment of RMB2.23 billion to acquire a 51% stake in Yongtaiwen Expressway. It is an exciting time for the Group as we are embarking on a new phase of growth and expansion built upon our solid foundation. The Group currently manages and operates three toll roads in China with a total length of approximately 274 km. The acquisition of Yongtaiwen Expressway will complement our existing toll road business and elevate the scale of our operations. With this acquisition, our toll road portfolio will be expanded to about 412 km from the current 274 km. As part of our strategy to streamline portfolio, completed of our our the the 33.4% toll road Group disposal interest
281,048 203,205 38
*Non-recurring items refer to the impairment loss on the Groups investment in Yuyao joint ventures incurred in FY2009 and the gain on disposable of an available-for-sale nancial asset in FY2010 Non-recurring items* Toll Road Operations Property Development & Others 2010 HK$000 Prot Before Tax 2009 HK$000 % Change Property Development & Others Toll Road Operations 2010 HK$000 2009 HK$000 % Change
Segmental Performance
Revenue
9,023
13,128
(31)
121,575 130,598
197,490 210,618
(38) (38)
258,781
381,340
(32)
(19,047)
(10,129)
88
239,734
371,211
(35)
41,314
(168,006)
n.m.
in Luomei Highway in January 2010, realising a gain of approximately HK$41.3 million.
Financial Review
I am pleased to report that the Group turned in a good set of results in 2010. Our revenue declined 38% to HK$130.6 million on the back of lower sales volume of development properties. Net prot before tax and non-recurring items, at HK$239.7 million, was 35% lower. Including the sale of Luomei Highway in January 2010 which resulted in an exceptional gain of HK$41.3 million and the impairment charge of HK$168 million incurred last year, our prot before tax increased 38% to HK$281 million.
Our net prot attributable to shareholders improved by 37% to HK$267.4 million, delivering a 23% growth in basic earnings per share to 38.81 HK cents. Our balance sheet remains strong and healthy. Net assets as at 31 December 2010 stood at HK$3.9 billion. We have a healthy cash reserve of about HK$1.3 billion. Net asset value per share increased from HK$4.59 to HK$4.62.
an impairment charge of HK$168 million taken against the Groups investment in Yuyao Highway. In 2010, the Group recognized an exceptional gain of HK$41.3 million from the disposal of the Groups entire interest in Luomei Highway. Excluding these non-recurring items, the Groups pre-tax prot would have declined by 35%. Basic EPS and diluted EPS were 38.81 HK cents and 31.30
Revenue
Group revenue registered a decrease of 38% to HK$130.6 million compared to HK$210.6 million a year ago. The property development and others business segment, which made up 92% of the total Group revenue, registered a drop in settlement numbers of development properties due to the challenging operating environment which resulted in slower sales compared to last year. Revenue from toll road operations comprises income from an infrastructure joint venture (the Groups investment in the Luomei Highway joint venture) and interest income from xed deposits placed with banks. Revenue from this business segment accounted for the remaining 8% of the Groups total revenue. It reported lower revenue this year due to the absence of investment income after the disposal of Luomei Highway was completed in January 2010.
HK cents respectively as compared to 31.61 HK cents and 22.88 HK cents in the previous year, representing an increase of 23% and 37% respectively. Toll revenue registered by the Groups toll road joint ventures reached RMB778.3 million, up 21% from the previous year due mainly to the rise in trafc volumes on our roads which grew 17.5% compared to last year. Pre-tax prot contribution (excluding non-recurring items) from the toll road business decreased 32% due principally to the reduction in prot contribution from Guiliu Expressway arising from the reduction in prot/cash sharing ratio and cessation of subsidy income pursuant to the Guiliu Expressway joint venture agreement. Our New Zealand home building operations encountered an extremely difcult business environment in 2010. Sales activities and transactions suffered on the lack of buying interest and uncertainty over further mortgage rate increases. The property development and others business segment as a whole posted a pre-tax loss of HK$19 million compared to a loss of HK$10.1 million last year. The contribution to the Groups prot before tax by the respective toll roads in 2010 and 2009 were as follows:
2009 HK$000 Total Share of Results Subsidy Income Total
Protability
For the year under review, net prot after tax was HK$267.4 million, an increase of 37% over the HK$195.4 million attained last year. The Groups pre-tax prot increased 38% to HK$281 million from HK$203.2 million attained last year. Pre-tax prot for 2009 of HK$203.2 million included
2010 HK$000 Share of Results Jointly Controlled Entities Guiliu Expressway Guihuang Highway Yuyao Highway Subsidy Income
% Change
88,349 125,468 21,782 235,599
_ 16,172 16,172
88,349 141,640 21,782 251,771
153,655 120,864 15,610 290,129
53,417 14,484 67,901
207,072 135,348 15,610 358,030
(57.3) 4.6 39.5 (29.7)
Infrastructure Joint Venture Luomei Highway Other Income/ (Expenses)
235,599
16,172 16,172
1,801 5,209 258,781 41,314 300,095
290,129 290,129
67,901 67,901
9,177 14,133 381,340 (168,006) 213,334
n.m. n.m. (32.1) n.m. 40.7
Non-recurring Items Total
235,599
Operations Review
Toll Roads
The Chinese economy posted upbeat economic data in 2010, with GDP expanding by 10.3% to reach RMB39.8 trillion. Fuelled by the robust economy, trafc volume and toll revenue achieved by the Groups toll road projects in China increased by 17.5% and 21% respectively. Prot contribution (excluding non-recurring items) registered by our toll roads however declined by 32%, impacted by the reduction in prot/cash sharing ratio of our major toll road asset, the Guiliu Expressway.
Y06
3,338 3,392 3,457 3,883 4,251
Guiliu Expressway Trafc Volume (000 Vehicles)
Trafc ows and toll revenue recorded by each of the toll roads are as follows:
Y07 Y08 Y09
Trafc Volume
2010 Vehicles (000)
2009 Vehicles (000)

3,883
Change
Y10
(%)
Guiliu Expressway
4,251
9.5
Guiliu Expressway Toll Revenue (RMB 000)

Y06 Y07
222,975 241,521 245,559 343,511 444,455
Guihuang Highway
20,995
19,690
6.6
Yuyao Highway
16,743
12,172
37.6 Y08
Total
41,989
35,745
17.5
Y09 Y10
Toll Revenue
2010 RMB (000)
2009 RMB (000)

343,511
Change
Guiliu Expressway
Guiliu Expressway has registered strong growth in toll revenue since the implementation of a weight-based toll collection system for good vehicles since 1 July 2009. For the year under review, toll revenue from Guiliu Expressway increased by 29.4% over the previous year. Fuelled by the stable economic environment in China, extension of the road network in Guangxi Zhuang Autonomous Region and the continued increase in car ownership, Guiliu Expressway registered healthy trafc growth during the year. In accordance with the Guiliu Expressway joint venture agreement, the Groups prot/cash sharing entitlement in
(%)
Guiliu Expressway
444,455
29.4
Guihuang Highway
211,330
216,299
(2.3)
Yuyao Highway
122,564
83,596
46.6
Total
778,349
643,406
21.0
10
CEOS MESSAGE (CONTD)
Guihuang Highway Trafc Volume (000 Vehicles)

Y06 Y07 Y08 Y09 Y10
15,795 16,253 15,301 19,690 20,995
Yuyao Highway Trafc Volume (000 Vehicles)

Y06 Y07 Y08 Y09 Y10
8,320 13,924 13,555 12,172 16,743
Guihuang Highway Toll Revenue (RMB 000)

Y06 Y07 Y08 Y09 Y10
106,627 153,352 179,469 216,299 211,330
Yuyao Highway Toll Revenue (RMB000)

Y06 Y07 Y08 Y09 Y10
108,370 123,358 106,955 83,596 122,564
the 40%-owned Guiliu Expressway was reduced from 90% to 40% with effect from 1 January 2010 and the receipt of subsidy had ceased from the same date. As a result, prot contribution from Guiliu Expressway declined by 57.3% or HK$118.7 million. One of the main benets of toll-by-weight tariff system is that it reduces overloaded vehicles on the roads which in turn will lower road surface maintenance costs in the long run.
Toll revenue posted by Guihuang Highway amounted to RMB211.3 million, a decrease of 2.3% compared to the amount recorded last year. However Guihuang Highway achieved a prot growth of 4.6% due to lower direct expenses incurred, partially offset by the absence of tax subsidy from the local tax authority.
Yuyao Highway
The performance of Yuyao Highway improved after the relocation of a toll station and the change of toll rate structure at this station. Toll revenue from Yuyao Highway surged by 46.6% while prot contribution increased 39.5% on the back of the higher toll revenue achieved.
Guihuang Highway
The performance of Guihuang Highway in the current period was affected by mild trafc diversion from competing roads.
11
Property Development and Other Businesses

In the past 12 months, the low level of sales in the general property market in New Zealand had a signicant impact on our home-buiding subsidiary in New Zealand, Universal Homes Limited (Universal Homes) as a large percentage of its sales are to existing home buyers who have to sell their own homes to upgrade to a Universal Homes product. Sales volume is likely to remain at recent low levels for the majority of 2011 based on the outlook for the primary drivers such as housing affordability and the state of the New Zealands economy which is expected to remain sluggish in 2011. Universal Homes has an established track record and strong brand name in New Zealand, coupled with an experienced management team and prudent cost management, we believe it will be able to ride out these difcult times.
China such as the recently announced proposed acquisition of Yongtaiwen Expressway. We have already obtained our shareholders approval for the acquisition and are still in the process of obtaining the relevant PRC governmental approvals. We believe the successful completion of the acquisition of Yongtaiwen Expressway will further solidify our position as a major player in the PRCs toll road industry. The acquisition of Yongtaiwen Expressway, upon completion, is immediately earnings accretive. Yongtaiwen Expressway has recorded compounded annual growth of about 9.1%, 4.9% and 5.0% in its trafc ow, toll revenue and net prot after tax respectively between the nancial year ended 31 December 1997 and 31 December 1999. The robust economic growth of the prosperous coastal Zhejiang province will continue to be the main driver for Yongtaiwen Expressways trafc ow and toll revenue growth. The consolidation of the nancial results of Yongtaiwen Expressway upon completion will therefore boost our toll road prots. The Company intends to nance the acquisition of Yongtaiwen Expressway using a combination of internal cash
Outlook
Moving forward, we plan to further strengthen and expand our toll road business, focusing on expressway projects in
12
CEOS MESSAGE (CONTD)
resources and external nancing. Our nancial discipline and strong operating cash ow will put us in good stead to secure external bank borrowings. The overall toll road industry outlook in China remains positive. China posted 10.3% growth rate in 2010. Although the recent policy measures, such as raising interest rate and banks reserve ratio, is expected to affect Chinas economic growth, the general consensus is that its economy will continue to grow at a rate of between 7% to 8%. While most of the advanced countries are yet to fully recover from the nancial crisis of 2008, emerging markets especially China and India are showing a high rate of economic expansion and growing demand. Rising car ownership and increasing urbanization in China should continue to underpin our toll roads trafc volume and toll revenue growth which bodes well for our business. The business environment for our property development business in New Zealand will continue to remain challenging and we expect sales of our residential properties to continue to be weak for the next 12 months.
As the Group enters its next phase of growth, we will accelerate our growth strategies and enhance shareholder value for the long term. I am condent that with the continued strong support of our customers, stakeholders, partners and staff, together as a team, we will be able to take our Company to greater heights. Jiang Yan Fei Chief Executive Ofcer
13
BOARD OF DIRECTORS
Mr Dong Xue Bo Chairman
Mr Dong was appointed Chairman of the Board in February 2009. He is the Assistant to the President of China Merchants Group Limited, Executive Vice Chairman and Chief Executive Ofcer of Huajian Transportation Economic Development Center, a wholly-owned subsidiary of China Merchants Group Limited. Mr Dong has extensive experience in Chinas national expressway network planning and management. He successively served as Deputy Section Director, Section Director, Deputy Director and Director in the Strategic Planning Department of the Ministry of Transportation in the PRC before taking up his current appointment in the China Merchants Group. He was also previously a vice-mayor of Luoyang City in Henan Province. In the last few years, he was actively involved in Chinas development of a long-term framework for its highways and waterways transportation system. Mr Dong graduated from Liaoning University in the PRC with a Bachelors Degree in Economics and holds an MBA from China Europe International Business School. He is currently the Vice Chairman of China Highway Society, Chairman of the Operation and Management Sub-society of the China Highway Society, Deputy President of the National Defence Transportation Society, standing member of China Young Entrepreneur Society as well as an adjunct professor at Nankai University and Dalian Maritime University.
Mr Zheng Hai Jun Vice Chairman

Mr Zheng was appointed Vice Chairman of the Board In February 2011. Mr Zheng joined the China Merchants Group in 1998 and is currently the General Manager of Huajian Transportation Economic Development Center, a wholly-owned subsidiary of China Merchants Group Limited. Mr Zheng has been actively involved in transportation management in the PRC since the 1990s. He brings with him an extensive knowledge and skills in infrastructure management having held senior project and corporate management roles in several of Chinas infrastructure projects including expressways and ports. Mr Zheng is the Chairman of Huabei Expressway Co., Ltd, a company listed on Shenzhen Stock Exchange. He is also the Vice Chairmen of two other companies listed on Shanghai Stock Exchange. Mr Zheng holds a Masters Degree in Investment Management from the Graduate School of China Academy of Social Science and an MBA from the University of South Australia International Graduate School of Management. He is a senior economist and a standing member of China Highway Society.
Mr Jiang Yan Fei Vice Chairman & Chief Executive Ofcer

Mr Jiang was appointed Director and Chief Executive ofcer of the Company in December 2004 and further assumed the position of Vice Chairman in Febraury 2011. He also assumed the concurrent position of Executive Deputy General Manager of Huajian Transportation Economic Development Centre. Mr Jiang joined China Merchants Holdings (International) Company Limited (CMHI) in 2001 as a Deputy General Manager, whose main area of responsibility was the toll road business. Prior to joining CMHI, he was the Deputy General Manager of China Merchants Shekou Holdings Co. Ltd. He has extensive experience in the development of toll roads and transportation systems including investment management, technology and communications in the PRC and was a senior manager of the Shandong Provincial Transport Development and Investment Company. Mr Jiang is a telecommunication engineer and a senior economist and a standing member of the Operation and Management Sub-society of the China Highway Society. He holds an MBA from Murdoch University, Australia, and graduated from Chongqing Communication College in the PRC.
14
Mr Wu Xin Hua Executive Director & Chief Operating Ofcer

Mr Wu joined the Company as an Executive Director and Chief Operating Ofcer in February 2011. He is concurrently a Deputy General Manager of Huajian Transportation Economic Development Center where he is responsible for developing Huajians business through new acquisitions and overseeing the integration of Huajians various businesses. Mr Wu has extensive experience in corporate nance, specialising in asset restructuring and equity and debt nancing. He has held senior management positions at nancial institutions including CITIC Securities Co., Ltd, Shandong Securities Co., Ltd and China Merchants Securities Co., Ltd with responsibilities in the areas of general management and investment banking. Prior to joining Huajian, Mr Wu was the General Manager of the Investment Banking Department of China Merchants Securities Co., Ltd. Mr Wu graduated from Renmin University of China with a Bachelors Degree in Economics. He is currently the Vice Chairman of the Operation and Management Sub-society of the China Highway Society.
Dr Lim Heng Kow Independent Director

Dr Lim was appointed to the Board in July 1996. Dr Lim has more than 30 years experience in the hotel, property development and retail industries as well as consultancy businesses. He has served as managing/executive directors and/or senior consultants to many listed and non-listed companies in Singapore, Malaysia and China over the past 30 years. In the early part of his career, he was an academic, having lectured in the universities of Malaysia and Singapore, and then worked briey as a journalist. Dr Lim holds a PhD from the University of London, a Masters Degree in Arts from University of Ibadan (formerly London University, Ibadan College), Nigeria and a Bachelors Degree in Arts from the Nanyang University of Singapore.
Dr Hong Hai Independent Director

Dr Hong joined the Board in May 2005. He is a Professorial Fellow at the Nanyang Technological University. Prior to joining the academia, he was President and CEO of Haw Par Corporation Limited, a leading public listed group in Singapore, from 1990 to 2003. He was also previously a Member of Parliament. Dr Hong serves as an honorary council member of the Singapore Chinese Chamber of Commerce & Industry and a council member of the Nanyang Academy of Fine Arts. Dr Hong obtained a Bachelor of Electrical Engineering Degree from the University of Canterbury, New Zealand. He also holds a Masters Degree in Public Administration from Harvard University, a PhD in Economics from Carnegie Melon University, USA and a Masters Degree in Chinese Language and Literature from Beijing Normal University.
15
KEY EXECUTIVE OFFICERS

Mr Jiang Yan Fei
Chief Executive Ofcer
Mr Wu Xin Hua
Chief Operating Ofcer
Mr Chen Yuan Jun

Deputy General Manager & Chief Operating Ofcer
Mr Chen is responsible for overseeing the Groups toll road business in China. He was previously the General Manager of the Infrastructure Department of China Merchants Holdings (International) Co. Ltd. (CMHI) where he was actively involved in the management and operations of the toll road business of CMHI. Prior to joining CMHI in 1999, Mr Chen worked successively with Qinhuangdao Port Administration and China Merchants Group Limited. He has more than twenty years experience in transportation infrastructure, port investment and management, and enterprise integration and governance. Mr Chen holds an MBA Degree and graduated from China South East University in the PRC.
Ms Lim Lay Hoon

Company Secretary
Ms Lim is responsible for the corporate secretarial and human resource and administration matters of the Company. She has been with the Company since 1995 when she joined as an Assistant Finance & Admin Manager. She later assumed the positions of Finance & Admin Manager and Financial Controller in 1999 and 2000. Prior to joining the Company, she had worked as an accountant in a local company and an auditor in a public accounting rm. A member of the Institute of Certied Public Accountants of Singapore, Ms Lim holds an MBA from the Nanyang Technological University and graduated with a Bachelors Degree in Accountancy from the National University of Singapore.
Ms Chin Wenn
Finance Manager
Ms Chin joined the Company in September 2000 and is responsible for the accounting, nancial, treasury and tax functions of the Company. Prior to joining the Company, she had held various accounting and nance positions in-charge of matters relating to accounting, tax and nancial management in various companies in Singapore and China. She is a Certied Public Accountant (Singapore), a Chartered Certied Accountant (UK) and a CFA Charter holder. She graduated with a Bachelor of Economics Degree from Nankai University, the PRC.
16
Mr Graham Basil Street

CEO of Universal Homes Limited
Mr Street has been with the Group for 33 years and is responsible for overseeing the business, management and sales activities of our home building subsidiary in New Zealand. He joined Universal Homes as an accountant in 1978 and was appointed Company Secretary in 1980 and Financial Director in 1985. He was promoted to CEO in 1993. Prior to joining Universal Homes, he worked as an accountant in an Auckland based Chartered Accountant Partnership. He holds a Bachelors Degree in Commerce from Auckland University. He is an Associate Chartered Accountant of the Institute of Chartered Accountants of New Zealand.
Mr Yang Xu Dong
General Manager of Guiliu JV Enterprises
Mr Yang is responsible for overseeing the operations of the Guiliu Expressway. Mr Yang joined CMHI in 1999 as a Project Manager in the Infrastructure Department as well as Deputy General Manager in the Guiliu JV Enterprises. He graduated with a Masters Degree in Engineering from Chang An University, the PRC, and holds a Bachelors Degree from Xian Highway University, the PRC.
Mr Yang Guo Lin

General Manager of Guihuang JV Enterprises
Mr Yang is responsible for overseeing the operations of the Guihuang Highway. His previous appointments in the China Merchants Group included that of Deputy General Manager of the Guihuang JV Enterprises and Assistant to the General Manager of the Ningzhenluo JV Enterprises. He obtained his Masters Degree in Mechanical Engineering from Chang An University, the PRC. He also holds a Bachelors Degree from Xian Highway University, the PRC.
Mr Yuan Yi
General Manager of Yuyao JV Enterprises
Mr Yuan is responsible for overseeing the operations of the Yuyao Highway. Mr Yuan was previously a Project Manager of the Infrastructure Department of CMHI as well as Deputy General Manager in the Yuyao JV Enterprises. He obtained his Bachelors Degree and Masters Degree in Engineering both from Chang An University, the PRC.
17
FINANCIAL HIGHLIGHTS
Financial Years 2010 HK$000 Operating Results Revenue Prot before tax Income tax expense Prot for the year Financial Position Total assets Cash and cash equivalents Total equity Financial Ratio (%) Return on assets Return on equity Per Share Data Basic earnings (HK cents) Diluted earnings (HK cents) Net asset value (based on issued share capital) Net asset value (assuming all RCPS had been converted) Dividend Per Share (Singapore cents) Interim dividend Final dividend Total dividend 2.00 2.00 4.00 2.50 2.00 4.50 2.75 2.25 5.00 2.75 2.75 5.50 2.75 2.75 5.50 38.81 31.30 HK$4.62 HK$4.62 31.61 22.88 HK$4.59 HK$4.47 48.96 34.67 HK$4.50 HK$4.37 64.18 35.44 HK$4.21 HK$4.18 47.88 26.84 HK$3.79 HK$3.82 6.53 6.78 4.88 5.12 7.61 7.93 8.10 8.48 6.75 7.02 4,093,492 1,282,374 3,946,155 4,005,760 1,012,111 3,816,916 3,892,343 774,172 3,733,494 3,740,336 861,433 3,573,589 3,395,583 344,863 3,262,881 130,598 281,048 (13,612) 267,436 210,618 203,205 (7,797) 195,408 211,649 302,342 (6,120) 296,222 514,413 324,661 (21,670) 302,991 435,366 249,361 (20,165) 229,196 2009 HK$000 2008 HK$000 2007 HK$000 2006 HK$000
18
REVENUE
(HK$ million)
NAV PER SHARE

(HK$)
4.62
514 435
4.59
4.50
4.21
3.79
131
211
212
2010
2009
2008
2007
2006 2010 2009 2008 2007 2006
NET PROFIT AFTER TAX

(HK$ million)
VEHICLE TRAFFIC VOLUME

(million)
267
195
296
303 229
42
37
34
35
29
2010
2009
2008
2007
2006 2010 2009 2008 2007 2006
BASIC EARNINGS PER SHARE

(HK cents)
TOLL REVENUE
(RMB million)
64.81 48.96 47.88
778
657
550
541
38.81
460
31.61
2010
2009
2008
2007
2006 2010 2009 2008 2007 2006
19
CORPORATE GOVERNANCE
The Company is committed in its continuing efforts to achieving high standards of corporate governance and business conduct in order to ensure greater transparency and to safeguard the interests of shareholders. We are pleased to conrm that the Company has adhered to the principles and guidelines of the Code of Corporate Governance 2005 (the 2005 Code), save for the Guideline on the composition of the Remuneration Committee, the reason for which deviation is explained below. This report describes the Companys corporate governance practices with specic reference to the principles and guidelines of the 2005 Code.
BOARD OF DIRECTORS
Principle 1: Boards Conduct of its Affairs Principle 2: Board Composition and Guidance
The Board comprises six directors, of which two are executive directors, two are non-executive directors and two are independent directors. The Board sets the overall strategy of the Group and sets policies on matters such as nancial control, nancial performance and risk management procedures and supervises the management of the Companys business and affairs. Through Board meetings and Board committees appointed by the Board, the Board monitors the performance of the Company, safeguards the Companys assets, oversees the internal controls and sets the business direction for the Company. The Board is of the view that the current size of the Board is appropriate considering the scope and nature of the operations of the Company and of the Group. The Board, of which one third are independent non-executive directors, is able to ensure that it is able to exercise its powers objectively and independently from Management. This is further enhanced by the separate roles of the Chairman and CEO. The standing of members of the Board in the business community and their experience in strategic planning and direction, accounting and nance, fund management, corporate nance and industry knowledge provide for effective decision making and direction to the Group. Key information on the directors is set out on pages 14 and 15. The Board holds meetings on a quarterly basis. When circumstances require, ad-hoc meetings are arranged. The Companys Articles of Association allow a Board meeting to be conducted by way of a teleconference. The Company has an established policy for new Board members to be briefed by management on the business activities of the Group and its strategic directions. Directors attendance at Board and Board Committee Meetings in FY2010 is as follows:
Board No. of Meetings Name of Director Mr Dong Xue Bo Mr Jiang Yan Fei Mr Yan Cheng Da* Ms Tsui Suet Lai Linda* Dr Lim Heng Kow Dr Hong Hai Held Attended Audit Committee No. of Meetings Held Attended Nominating Committee No. of Meetings Held Attended Remuneration Committee No. of Meetings Held Attended
5 5 5 5 5 5
4 5 5 2 5 5
5 5 5
4 5 5
1 1 1
1 1 1
1 1 1
1 1 1
*Mr Yan Cheng Da and Ms Tsui Suet Lai Linda resigned as Directors with effect from 18 February 2011.
In place of physical meetings, the Board also circulates written resolutions for approval by the relevant members of the Board.
20
Principle 3: Role of Chairman and Chief Executive Ofcer

The Company has a separate Chairman and CEO. They each perform separate functions to ensure that there is an appropriate balance of power and authority, and that accountability and independent decision-making are not compromised. The Chairman who is non-executive bears responsibility for the workings of the Board whilst the CEO is responsible for the day-to-day running of the Groups business. The CEO ensures that Board meetings are held when necessary and sets the Board meeting agenda in consultation with the Chairman and ensures that Board members are presented with complete, adequate and timely information. He works closely with management to ensure compliance with the Companys guidelines on corporate governance. Management staff who can provide additional insight into the matters to be discussed are invited to attend and present the necessary papers at the relevant juncture during the Board meeting.
Principle 6: Access to Information

Board members are provided with adequate and timely information prior to Board meetings and on an on-going basis. Detailed Board papers are prepared for each meeting of the Board and are normally circulated at least four working days in advance of each meeting. The Board papers contain sufcient information from management on nancial, business and corporate issues to enable the Directors to be briefed on issues to be considered at Board meetings. The Board has separate and independent access to the senior management and the Company Secretary at all times. The Board also has access to independent professional advice where appropriate. The Company Secretary attends all Board meetings and is responsible to ensure that Board procedures are followed. It is also the Company Secretarys responsibility to ensure that the Company complies with the requirements of the Companies Act and all other rules and regulations of the SGX-ST.
BOARD COMMITTEES
Nominating Committee (NC)
Principle 4: Board Membership
The NC comprises two non-executive independent Directors and a non-executive Director. Dr Lim Heng Kow who is a non-executive independent Director chairs the NC. The other members of the NC are Dr Hong Hai (non-executive and independent) and Mr Dong Xue Bo (non-executive Director). The NC is guided by its term of reference that sets out its responsibilities. Some of these responsibilities include: to recommend to the Board on the appointment and re-appointment of Directors; to review annually the independence of each Director, and ensure that the Board comprises at least one-third independent Directors; to decide, where a Director has multiple board representation, whether the Director is able to and has been adequately carrying out his duties as Director of the Company; to decide how the Boards performance may be evaluated and propose objective performance criteria to assess effectiveness of the Board; and to assess the performance of the Board as a whole, as well as the contribution of each Director to the effectiveness of the Board.
21
New Directors are appointed by way of a Board resolution, after the NC makes necessary recommendations to the Board. Such new Directors must submit themselves for re-election at the next AGM of the Company. Our Articles of Association require one-third of our Directors to retire and subject themselves to re-election by shareholders at every AGM. The NC has reviewed, and is satised that Dr Lim Heng Kow and Dr Hong Hai can be considered as independent Directors. The year of initial appointment and last re-election of the Directors of the Company are set out as follows:
Date of rst appointment/ last re-election 6 February 2009/ 23 April 2009 30 December 2004/ 27 April 2010 4 November 2005/ 23 April 2009 6 February 2009/ 23 April 2009 26 July 1996/ 27 April 2010 27 May 2005/ 27 April 2010 18 February 2011/ Nil 18 February 2011/ Nil Board appointment (executive/non-executive/ independent) Board Committee as Chairman or member
Name of Director Mr Dong Xue Bo
Non-executive
Member:
Audit Committee Nominating Committee
Mr Jiang Yan Fei
Executive
Member:
Remuneration Committee
Mr Yan Cheng Da*
Executive
Nil
Ms Tsui Suet Lai Linda*
Non-executive
Nil Chairman: Audit Committee Nominating Committee Member: Remuneration Committee Chairman: Remuneration Committee Member: Audit Committee Nominating Committee Nil
Dr Lim Heng Kow
Independent Non-executive Independent Non-executive
Dr Hong Hai
Mr Zheng Hai Jun**
Non-executive
Mr Wu Xin Hua**
Executive
Nil
*Mr Yan Cheng Da and Ms Tsui Suet Lai Linda resigned as Directors with effect from 18 February 2011. **Mr Zheng Hai Jun and Mr Wu Xin Hua were appointed Directors with effect from 18 February 2011.
Principle 5: Board Performance

The NC, in considering the re-appointment of any Director, evaluates the performance of the Director. The NC, of which the Chairman of the Board is a member, uses performance criteria such as attendance record at meetings of the Board and Board committees, intensity of participation at meetings, the quality of interventions and special contributions. The NC has adopted a formal process for the evaluation of the performance of the Board. The objective of the evaluation process is to identify areas for continuous improvement to the Boards effectiveness. It is conducted by way of a board evaluation questionnaire to assess the Board as a whole using qualitative performance criteria such as an evaluation of the size and composition of the Board, Boards access to information, Board processes, Boards understanding of the Groups business operations and effectiveness of Board meetings. No evaluation of the individual Directors contribution to the effectiveness of the Board was performed during the year.
22
CORPORATE GOVERNANCE (CONTD)

Audit Committee (AC)
Principle 11: Audit Committee Principle 12: Internal Controls
The AC comprises two non-executive independent Directors and a non-executive Director. Dr Lim Heng Kow who is a non-executive independent Director chairs the AC. The other members of the AC are Dr Hong Hai (non-executive and independent) and Mr Dong Xue Bo (non-executive Director). The AC, which has written terms of reference approved by the Board, performs the following delegated functions: review with external auditors their audit plan, evaluation of the system of internal controls, annual report and any other matters that the external auditors wish to discuss; review of audit matters, their scope and results, and cost effectiveness; review interim and annual nancial statements before submission to the Board for its approval; review the assistance given by management to the external auditors; review the independence and objectivity of external auditors; review the nature and extent of non-audit services performed by external auditors; review interested person transactions; conduct investigations into any matter within the ACs scope of responsibility and review of any signicant ndings of investigations; and review arrangements by which employees of the Group may, in condence, raise concerns about possible improprieties in matters of nancial reporting or other matters, to ensure that arrangements are in place for the independent investigation of such matters and for appropriate follow up action.
The company has in place a whistle-blowing policy whereby accessible channels are provided for employees to raise concerns about possible improprieties in matters of nancial reporting or other matters. The AC has full access to and cooperation of Management and has full discretion to invite any Director and executive ofcer to attend its meetings. The AC has reviewed the volume of non-audit services to the Group by the external auditors, and is satised that the nature and extent of such services will not prejudice the independence and objectivity of the external auditors. In performing its functions, the AC met with the external auditors, without the presence of Management, and reviewed the overall scope of the external audit and the assistance given by Management to the auditors.
Principle 13: Internal Audit

The Board has appointed a public accounting rm in China to carry out the internal audit function of the Group. The internal audit team reports primarily to the AC. The internal audit review assignments are determined from time to time by the AC as its members deem appropriate and in the interest of the Group. An internal audit will be performed for 1 to 2 main operating companies every year. In FY2010, the internal audit team conducted an internal audit review on the Groups operations of the jointly controlled entities that operate the Yuyao Highway and was satised that there were adequate internal controls.
23
Remuneration Committee (RC)

Principle 7: Procedures for Developing Remuneration Policies Principle 8: Level and Mix of Remuneration Principle 9: Disclosure on Remuneration
The RC comprises two non-executive independent Directors and an Executive Director. Dr Hong Hai who is a nonexecutive independent Director chairs the RC. The other members of the RC are Dr Lim Heng Kow (non-executive and independent) and Mr Jiang Yan Fei (Chief Executive Ofcer). The Board is of the view that Mr Jiang Yan Fei, who is an executive Director, by remaining as a member of the RC will not compromise accountability and independent decision-making as he does not participate in the deliberation of his personal remuneration. The RC, which has written terms of reference approved by the Board, performs the following functions: recommend to the Board a framework of remuneration for the Board of Directors and key executives; determine specic remuneration packages for each Executive Director and the CEO or executive of similar rank if the CEO is not an Executive Director; review the remuneration of senior management; and administer the CMHP Share Option Scheme 2002.
In setting remuneration packages, the RC takes into account the performance of the Group as well as individual Directors and key executives, aligning their interests with those of shareholders and linking rewards to corporate and individual performance. The RC determines the remuneration packages for the CEO and Executive Directors based on the performance of the Group and the individual Directors. Independent Directors are paid directors fees, determined by the Board based on the effort, time spent and responsibilities of the independent Directors. All Directors are recommended by the RC to be paid a basic fee. Additional fees are payable to a Director for appointment as a member of a particular committee. A Director in the RC abstains from making any recommendation in connection with his personal remuneration.
The remuneration of Directors and key executives of the Company for the nancial year ended 31 December 2010 is set out below:
Fee (%) a. Directors of the Company S$250,000 to below S$500,000 Mr Jiang Yan Fei Mr Yan Cheng Da Below S$250,000 Mr Dong Xue Bo* Ms Tsui Suet Lai Linda** Dr Lim Heng Kow Dr Hong Hai b. Key Executives of the Company Below S$250,000 Mr Chen Yuan Jun Ms Lim Lay Hoon Ms Chin Wenn *Fees are paid to Mr Dong Xue Bos employer company. **Fees are paid to Ms Tsui Suet Lai Lindas employer company. She resigned as Director with effect from 18 February 2011. 50 79 79 46 20 20 4 1 1 100 100 100 100 100 100 100 100 100 100 100 54 76 43 23 3 1 100 100 Salary (%) Bonus (%) Benets (%) Total (%)
24
CORPORATE GOVERNANCE (CONTD)

There are no employees in the Group who are immediate family members of a Director or the CEO. Information on the China Merchants Holdings (Pacic) Limited Share Option Scheme 2002 is set out in the Report of the Directors on pages 28 to 29.
COMMUNICATION WITH SHAREHOLDERS

Principle 10: Accountability and Audit Principle 14: Communication with Shareholders Principle 15: Greater Shareholder participation
The Board is mindful of the obligation to provide timely and fair disclosure of material information. Shareholders are kept informed of developments and performances of the Group through announcements via SGXNET and the press (where appropriate) as well as the annual report. In presenting announcements of interim and full year results to shareholders, the Boards policy is to provide a balanced and understandable assessment of the Companys and Groups performance, position and prospects. Other announcements are also made on an ad-hoc basis where applicable and as soon as possible to ensure timely dissemination of the information to shareholders.
DEALINGS IN SECURITIES
The Company has adopted a set of code in relation to dealings in the Companys securities for the guidance of directors and ofcers pursuant to the SGX-ST Listing Manual. There should be no dealings in the Companys shares by its ofcers during the period commencing two weeks before the announcement of the Companys rst, second and third quarter nancial results and one month before the announcement of the Companys full year results, and ending on the date of the announcement of such results respectively. Directors and ofcers are also expected to observe insider trading laws at all times even when dealing in its own securities is allowed.
INTERESTED PERSON TRANSACTIONS POLICY

The Company has adopted an internal policy in respect of any transactions with interested persons and has set out the procedures for review and approval of the Companys interested person transactions. There were no interested person transactions conducted during the year ended 31 December 2010 (excluding transactions below S$100,000).
RISK MANAGEMENT
The Group has in place risk management practices which aim to identify and manage areas of signicant risks and appropriate measures to control and mitigate these risks. The identication and management of nancial risks such as credit, interest rate and currency risks are outlined in Note 4 (under the Notes to the Financial Statements) of the Annual Report.
MATERIAL CONTRACTS
There are no material contracts entered into by the Company or any of its subsidiaries involving the interests of the CEO or any Director.
25
FINANCIAL REPORT
27 Report of the Directors 31 Statement of Directors 32 Independent Auditors Report 33 Statements of Financial Position 34 Consolidated Income Statement 35 Consolidated Statement of Comprehensive Income 36 Statements of Changes in Equity 38 Consolidated Statement of Cash Flows 39 Notes to Financial Statements 78 Supplementary Information
REPORT OF THE DIRECTORS

The directors present their report together with the audited consolidated financial statements of China Merchants Holdings (Pacific) Limited (the Company) and its subsidiaries (collectively, the Group) and the statement of financial position and statement of changes in equity of the Company for the year ended December 31, 2010. 1 DIRECTORS The directors of the Company in office at the date of this report are: Mr Dong Xue Bo Mr Zheng Hai Jun Mr Jiang Yan Fei Mr Wu Xin Hua Dr Lim Heng Kow Dr Hong Hai 2 Chairman Vice Chairman Executive Director Executive Director
(Appointed on February 18, 2011) (Appointed on February 18, 2011)
ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE BENEFITS BY MEANS OF THE ACQUISITION OF SHARES AND DEBENTURES Neither at the end of the financial year nor at any time during the financial year did there subsist any arrangement whose object is to enable the directors of the Company to acquire benefits by means of the acquisition of shares or debentures in the Company or any other body corporate, except as disclosed in paragraphs 3 and 5 below.
DIRECTORS INTERESTS IN SHARES AND DEBENTURES The directors of the Company holding office at the end of the year had no interest in the share capital and debentures of the Company and related corporations as recorded in the Register of Directors Shareholdings kept by the Company under Section 164 of the Singapore Companies Act (the Act) except as disclosed below: Shareholdings in which the directors are deemed to have an interest As at As at December 31, December 31, 2009 2010
Name of directors and company in which interest is held The Company Ordinary shares fully paid (with no par value) Jiang Yan Fei Yan Cheng Da (resigned on February 18, 2011) Options to subscribe for ordinary shares (with no par value) Jiang Yan Fei Yan Cheng Da (resigned on February 18, 2011) Lim Heng Kow Hong Hai
190,000
340,000 273,000
1,200,000 610,000 150,000 150,000
1,200,000 610,000 150,000 150,000
27
As at As at December 31, December 31, 2009 2010 Related corporation China Merchant Holdings (International) Company Limited Ordinary shares of HK$0.10 each fully paid Tsui Suet Lai Linda (resigned on February 18, 2011) Options to subscribe for ordinary shares of HK$0.10 each Jiang Yan Fei Yan Cheng Da (resigned on February 18, 2011) Tsui Suet Lai Linda (resigned on February 18, 2011)
12,000
12,156
350,000 60,000 48,000
350,000 60,000 48,000
The directors interests in the shares and options of the company at January 21, 2011 were the same at December 31, 2010. 4 DIRECTORS RECEIPT AND ENTITLEMENT TO CONTRACTUAL BENEFITS Since the beginning of the year, no director has received or become entitled to receive a benefit which is required to be disclosed under Section 201(8) of the Singapore Companies Act, by reason of a contract made by the Company or a related corporation with the director or with a firm of which they are a member, or with a Company in which they have a substantial financial interest except for salaries, bonuses and other benefits as disclosed in the consolidated financial statements. 5 SHARE OPTIONS The China Merchants Holdings (Pacific) Limited Share Option Scheme 2002 (the Scheme) was approved and adopted by the members of the Company at an Extraordinary General Meeting held on May 30, 2002 and modifications to the Scheme were approved by the members of the Company at the Extraordinary General Meetings held on April 27, 2006 and April 25, 2008. The Scheme is administered by the Remuneration Committee, which comprises the following directors: Dr Hong Hai (Chairman) Mr Jiang Yan Fei Dr Lim Heng Kow Other information regarding the Scheme is set out below: Group employees (including executive directors), non-executive directors, parent company employees and associate employees, subject to certain conditions, are eligible to participate in the Scheme. Controlling shareholders and their associates are not eligible to participate in the Scheme. The exercise price of the options can be set at a discount to the market price provided that the maximum discount shall not exceed 20% of the market price on the date of grant of the options. Options granted with the exercise price set at market price may be exercised 1 year after the grant date. Options granted with exercise price set at a discount to market price may only be exercised 2 years after the grant date. All options are settled by physical delivery of shares.
28
Report Of The Directors
Options granted to eligible employees (including executive directors) expire after 10 years from the grant date. Options granted to non-executive directors expire after 5 years from the grant date.
At the end of the financial year, details of the options granted under the Scheme on the unissued ordinary shares of the Company are as follows: Balance as at December 31, 2009 400,000 9,778,000 300,000 10,478,000 Balance as at Exercise Lapsed or December 31, price per expired 2010 share (S$) 400,000 9,778,000 300,000 10,478,000 0.500 0.789 0.789
Date of grant February 10, 2003 October 6, 2006 October 6, 2006
Granted or exercised
Exercisable period February 11, 2004 to February 10, 2013 October 7, 2007 to October 6, 2016 October 7, 2007 to October 6, 2011
The details of the options granted under the 2002 Scheme to persons who were directors of the Company during the year are as follows:
Aggregate options lapsed/ expired since commencement of the Scheme to the end of year
Name of director Jiang Yan Fei Yan Cheng Da (resigned on February 18, 2011) Lim Heng Kow Hong Hai
Aggregate options granted since commencement of the Scheme to the end of year 1,200,000 1,150,000 150,000 150,000
Aggregate options exercised since commencement of the Scheme to the end of year (540,000)
Aggregate options outstanding as at the end of year 1,200,000 610,000 150,000 150,000
Since the commencement of the Scheme, no options have been granted to the controlling shareholders of the Company or their associates and no participant under the Scheme has been granted 5% or more of the total number of options available under the Scheme. The options granted by the Company do not entitle the holders of the options, by virtue of such holding, to any rights to participate in any share issue of any other company. 6 AUDIT COMMITTEE The members of the Audit Committee during the year and at the date of this report are: Dr Lim Heng Kow (Chairman) Dr Hong Hai Mr Dong Xue Bo Independent and non-executive director Independent and non-executive director Non-executive director
The Audit Committee performs the functions specified in Section 201B of the Act, the SGX Listing Manual and the Code of Corporate Governance. The Audit Committee held five meetings since the last directors report. In performing its functions, the Audit Committee met with the Companys external auditors to discuss the scope of their work, the results of their examination and evaluation of the Companys internal accounting control system as part of their audit.
29
The Audit Committee also reviewed the following, where relevant, with the executive directors and external auditors of the company: the evaluation of the Groups systems of internal accounting controls; the Groups financial and operating results and accounting policies; the financial statements of the Company and the consolidated financial statements of the Group before their submission to the directors of the company and external auditors report on those financial statements; the quarterly, half-yearly and annual announcements as well as the related press releases on the results and financial position of the Company and the Group; the co-operation and assistance given by the management to the Groups external auditors; the re-appointment of the external auditors of the Group; and interested person transactions (as defined in Chapter 9 of the SGX Listing Manual).
The Audit Committee has full access to management and is given the resources required for it to discharge its functions. It has full authority and the discretion to invite any director or executive officer to attend its meetings. The Audit Committee also recommends the appointment of the external auditors and reviews the level of audit and non-audit fees. The Audit Committee reviewed the independence of the external auditors as required under Section 206(1A) of the Act and determined that the external auditors were independent in carrying out their audit of the financial statements of the Group and the Company. The Audit Committee has recommended to the directors the nomination of Deloitte & Touche LLP for re-appointment as external auditors of the Company at the forthcoming Annual General Meeting of the Company. 7 AUDITORS The auditors, Deloitte & Touche LLP, have expressed their willingness to accept re-appointment.
ON BEHALF OF THE DIRECTORS
Mr Dong Xue Bo
Mr Jiang Yan Fei March 30, 2011
30
STATEMENT OF DIRECTORS
In the opinion of the directors, the consolidated financial statements of the Group and statement of financial position and statement of changes in equity of the Company as set out on pages 33 to 77 are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at December 31, 2010, and of the results, changes in equity and the cash flows of the Group, and changes in equity of the Company for the year then ended and at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.
ON BEHALF OF THE DIRECTORS
Mr Dong Xue Bo
Mr Jiang Yan Fei March 30, 2011
31
INDEPENDENT AUDITORS REPORT

TO THE MEMBERS OF CHINA MERCHANTS HOLDINGS (PACIFIC) LIMITED Report on the Financial Statements We have audited the accompanying financial statements of China Merchants Holdings (Pacific) Limited (the Company) and its subsidiaries (the Group) which comprise the statements of financial position of the Group and the Company as at December 31, 2010, and the income statement, statement of comprehensive income, statement of changes in equity and statement of cash flows of the Group and the statement of changes in equity of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 33 to 77. The financial statements of the Group and Company for the year ended December 31, 2009 were audited by another auditor whose report dated April 5, 2010 expressed an unqualified opinion on those financial statements. Managements Responsibility for the Financial Statements Management is responsible for the preparation of financial statements that gives a true and fair view in accordance with the provisions of the Singapore Companies Act (the Act) and Singapore Financial Reporting Standards and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation of financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements of the Group and the statement of financial position and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at December 31, 2010 and of the results, changes in equity and cash flows of the Group and the changes in equity of the Company for the year ended on that date. Report on Other Legal and Regulatory Requirements In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act. Deloitte & Touche LLP Public Accountants and Certified Public Accountants
Singapore March 30, 2011
32
STATEMENTS OF FINANCIAL POSITION

December 31, 2010 Group Note 2010 HK$000 ASSETS Current assets Cash and cash equivalents Trade and other receivables Mortgage advances Inventories Loan to an infrastructure joint venture Available-for-sale investment Total current assets Non-current assets Property, plant and equipment Interests in subsidiaries Interests in jointly controlled entities Club membership Mortgage advances Deferred tax assets Total non-current assets Total assets 12 13 14 15 8 16 14,179 2,365,543 376 12,380 2,392,478 4,093,492 13,638 2,438,396 376 11 14,032 2,466,453 4,005,760 421 3,218,772 376 3,219,569 4,099,451 452 3,063,606 376 3,064,434 3,726,115 6 7 8 9 10 11 1,282,374 22,235 396,405 1,701,014 1,012,111 73,203 62 370,304 6,522 77,105 1,539,307 556,356 323,526 879,882 357,493 304,188 661,681 2009 HK$000 Company 2010 HK$000 2009 HK$000
LIABILITIES AND EQUITY Current liabilities Trade and other payables Interest-bearing liabilities Provision for warranties Dividend payable Current tax payable Total current liabilities Non-current liability Deferred tax liabilities Capital and reserves Share capital Share option reserve Statutory reserve Fair value reserve Currency translation reserve Reserve on consolidation Accumulated profits Total equity Total liabilities and equity 20 21 21 21 21 21 2,728,967 6,025 62,193 384,917 (78,930) 842,983 3,946,155 4,093,492 2,728,967 6,025 52,502 41,307 309,733 (78,930) 757,312 3,816,916 4,005,760 2,728,967 6,025 151,559 2,886,551 4,099,451 2,728,967 6,025 177,008 2,912,000 3,726,115 16 12,300 21,710 17 18 19 52,486 66,267 10,121 6,163 135,037 117,286 28,233 10,220 11,249 146 167,134 1,206,737 6,163 1,212,900 802,866 11,249 814,115
See accompanying notes to financial statements.

33
CONSOLIDATED INCOME STATEMENT

Year ended December 31, 2010 Group Note Revenue Cost of sales Gross profit Other operating income Distribution expenses Administrative expenses Other operating expenses Finance costs Subsidy income Share of results of jointly controlled entities (net of tax) Profit before tax Income tax expense Profit for the year 27 28 25 26 14 24 23 2010 HK$000 130,598 (113,586) 17,012 68,179 (7,159) (44,254) (56) (4,445) 16,172 235,599 281,048 (13,612) 267,436 2009 HK$000 210,618 (173,997) 36,621 23,743 (8,444) (34,262) (168,157) (4,326) 67,901 290,129 203,205 (7,797) 195,408
Earnings per share (HK cents): Basic Diluted
29 38.81 31.30 31.61 22.88
34
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Year ended December 31, 2010 Group 2010 HK$000 Profit for the year Other comprehensive income Translation gain arising on consolidation Net change in fair value of available-for-sale investment transferred to profit or loss (41,307) 75,184 50,920 267,436 2009 HK$000 195,408
Other comprehensive income for the year, net of tax
33,877
50,920
Total comprehensive income for the year
301,313
246,328

35
STATEMENTS OF CHANGES IN EQUITY

Year ended December 31, 2010 Share Currency Share Statutory Fair value option translation Reserve on Accumulated capital reserve reserve reserve reserve consolidation profits Total HK$000 HK$000 HK$000 HK$000 HK$000 HK$000 HK$000 HK$000 43,309 9,193 41,307 7,275 (1,250) 258,813 50,920 (78,930) 732,753 195,408 1,250 (9,193) 3,733,494 246,328
Group
Balance at January 1, 2009 2,728,967 Total comprehensive income for the year Share options forfeited Transfer from accumulated profits One-tier tax exempt dividends: Final ordinary dividend paid of Singapore 2.25 cents per share in respect of 2008 Interim ordinary dividend paid of Singapore 2.5 cents per share Non-cumulative preference dividend payable of Singapore 0.75 cents per share Balance at December 31, 2009 2,728,967 Total comprehensive income for the year Transfer from accumulated profits One-tier tax exempt dividends: Final ordinary dividend paid of Singapore 2 cents per share in respect of 2009 Interim ordinary dividend paid of Singapore 2 cents per share Non-cumulative preference dividend payable of Singapore 0.75 cents per share Balance at December 31, 2010 2,728,967
(70,331)
(70,331)
(81,326)
(81,326)
52,502 9,691
41,307 (41,307)
6,025
309,733 75,184
(78,930)
(11,249) 757,312 267,436 (9,691)
(11,249) 3,816,916 301,313
(79,888)
(79,888)
(86,023)
(86,023)
62,193
6,025
384,917
(78,930)
(6,163) 842,983
(6,163) 3,946,155
See accompanying notes to the financial statements.
36
Statements Of Changes In Equity
Share Share capital Company Balance at January 1, 2009 Total comprehensive income for the year Transfer from share option reserve to accumulated profits upon lapse of share option One-tier exempt dividends: Final ordinary dividend paid of Singapore 2.25 cents per share in respect of 2008 Interim ordinary dividend paid of Singapore 2.50 cents per share Non-cumulative preference dividend payable of Singapore 0.75 cents per share Balance at December 31, 2009 Total comprehensive income for the year One-tier exempt dividends: Final ordinary dividend paid of Singapore 2 cents per share in respect of 2009 Interim ordinary dividend paid of Singapore 2 cents per share Non-cumulative preference dividend payable of Singapore 0.75 cents per share Balance at December 31, 2010 2,728,967 6,025 (6,163) 151,559 (6,163) 2,886,551 (86,023) (86,023) (79,888) (79,888) 146,625 146,625 2,728,967 6,025 (11,249) 177,008 (11,249) 2,912,000 (81,326) (81,326) (70,331) (70,331) (1,250) 1,250 129,725 129,725 HK$000 2,728,967 option reserve HK$000 7,275 Accumulated profits HK$000 208,939 Total HK$000 2,945,181

37
CONSOLIDATED STATEMENT OF CASH FLOWS

Year ended December 31, 2010 Group 2010 HK$000 CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax Adjustments for: Depreciation of property, plant and equipment Loss on disposal of plant and equipment Dividend income Interest expense Interest income Impairment on investment in jointly controlled entities Gain on disposal of available-for-sale investment Exchange differences Share of results of jointly controlled entities Operating cash flows before movements in working capital Inventories Receivables and advances Trade and other payables Cash (used in) generated from operations Income taxes paid Net cash (used in) from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Interest received Repayment of loan granted to infrastructure joint venture Purchase of plant and equipment Proceeds from sale of plant and equipment Proceeds from disposal of available-for-sale investment Repayment of loans by jointly controlled entities Deposit for potential investments refunded Dividends received Net cash from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Interest paid Proceeds from/(repayment of) bank loans Dividends paid Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Net effect of exchange rate changes in the balance of cash held in foreign currencies Cash and cash equivalents at end of the year 19,135 1,282,374 3,259 1,012,111 (3,700) 31,787 (177,160) (149,073) 251,128 1,012,111 (3,624) (26,264) (151,657) (181,545) 234,680 774,172 9,152 6,529 (892) 8 38,624 87,814 285,474 426,709 6,415 6,819 (122) 87 74,850 24,336 221,488 333,873 1,142 56 (1,801) 4,445 (10,519) (41,314) (26,234) (235,599) (28,776) (829) 57,171 (33,525) (5,959) (20,549) (26,508) 1,031 151 (9,177) 4,326 (6,245) 168,006 (13,580) (290,129) 57,588 12,638 (19) 26,283 96,490 (14,138) 82,352 281,048 203,205 2009 HK$000
38
NOTES TO FINANCIAL STATEMENTS

December 31, 2010 1 GENERAL The Company (Registration No. 198101278D) is incorporated in Singapore with its registered office at 50 Raffles Place, #32-01 Singapore Land Tower, Singapore 048623 and principal place of business at 8 Temasek Boulevard, #38-01 Suntec Tower Three, Singapore 038988. The Company is listed on the mainboard of the Singapore Exchange Securities Trading Limited. The financial statements are expressed in Hong Kong dollars. The principal activities of the Company are those of investment holding. The principal activities of the subsidiaries are disclosed in Note 13 to the financial statements. The immediate and ultimate holding companies during the financial year were Easton Overseas Limited, a company incorporated in the British Virgin Islands (BVI), and China Merchants Group Limited, a company registered in the Peoples Republic of China (PRC), respectively. The statement of financial position and statement of changes in equity of the Company and the consolidated financial statements of the Group for the year ended December 31, 2010 were authorised for issue by the Board of Directors on March 30, 2011. 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING The financial statements have been prepared in accordance with the historical cost basis, except as disclosed in the accounting policies below, and are drawn up in accordance with the provisions of the Singapore Companies Act and Singapore Financial Reporting Standards (FRS). ADOPTION OF NEW AND REVISED STANDARDS In the current financial year, the Group has adopted all the new and revised FRSs and Interpretations of FRS (INT FRS) that are relevant to its operations and effective for annual periods beginning on or after January 1, 2010. The adoption of these new/revised FRSs and INT FRSs does not result in changes to the Groups and Companys accounting policies except for the adoption of FRS 27 (2009) Consolidated and Separate Financial Statements and FRS 103 (2009) Business Combinations. However, the change in accounting policies has no material effect on the amounts reported for the current or prior years. At the date of authorisation of these financial statements, the following FRSs, INT FRSs and amendments to FRS that are relevant to the Group and the Company were issued but not effective: FRS 24 (Revised) Related Party Disclosures Improvements to Financial Reporting Standards (issued in October 2010)
Consequential amendments were also made to various standards as a result of these new/revised standards. Management anticipates that the adoption of the above FRSs, INT FRSs and amendments to FRS in future periods will not have a material impact on the financial statements of the Group and of the Company in the period of their initial application except for the following: FRS 24 (Revised) Related Party Disclosures FRS 24 (Revised) Related Party Disclosures is effective for annual periods beginning on or after January 1, 2011. The revised Standard clarifies the definition of a related party and consequently additional parties may be identified as related to the reporting entity.
39
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (contd) ADOPTION OF NEW AND REVISED STANDARDS (contd) FRS 24 (Revised) Related Party Disclosures (contd) In addition, the revised Standard provides partial exemption for government-related entities, in relation to the disclosure of transactions, outstanding balances and commitments. Where such exemptions apply, the reporting entity has to make additional disclosures, including the nature of the governments relationship with the reporting entity and information on significant transactions or group of transactions involved. In the period of initial adoption, the changes to related party disclosures, if any, will be applied retrospectively with restatement of the comparative information. BASIS OF CONSOLIDATION The consolidated financial statements incorporate the financial statements of the Company and entities (including special purpose entities) controlled by the Company (its subsidiaries) and the financial statements of the Company and the subsidiaries are made up to December 31 for each year. Control is achieved when the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in the consolidated profit or loss from the effective date of acquisition or to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries and jointly controlled entitles to bring their accounting policies used in line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. Non-controlling interests in subsidiaries are identified separately from the Groups equity therein. The interest of non-controlling shareholders may be initially measured (at date of original business combination) either at fair value or at the non-controlling interests proportionate share of the fair value of the acquirees identifiable net assets. The choice of measurement basis is made on an acquisition-by-acquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance. Changes in the Groups interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the Groups interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company. In the Companys financial statements, investments in subsidiaries are carried at cost less any impairment in net recoverable value that has been recognised in the profit or loss.
40
Notes to Financial Statements
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (contd) BUSINESS COMBINATIONS Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the acquisition date fair values of assets given, liabilities incurred by the Group to the former owners of the acquiree, and equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred. Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments (see below). The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with FRS 39 Financial Instruments: Recognition and Measurement, or FRS 37 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognised in profit or loss. Where a business combination is achieved in stages, the Groups previously held interests in the acquired entity are remeasured to fair value at the acquisition date (i.e. the date the Group attains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of. The acquirees identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under the FRS are recognised at their fair value at the acquisition date, except that: deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with FRS 12 Income Taxes and FRS 19 Employee Benefits respectively; liabilities or equity instruments related to the replacement by the Group of an acquirees share-based payment awards are measured in accordance with FRS 102 Share-based Payment; and assets (or disposal groups) that are classified as held for sale in accordance with FRS 105 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see below), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date. The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and circumstances that existed as of the acquisition date and is subject to a maximum of one year from acquisition date. The accounting policy for initial measurement of non-controlling interests is described above. REVERSE ACQUISITION In 2004, the Company acquired the entire issued and paid-up share capital of Successful Road Corporation (SRC) from China Merchants Holdings (International) Company Limited. The acquisition of SRC was accounted for as a reverse acquisition where SRC was deemed to be the acquirer and the cost of the business combination was deemed to have been incurred by SRC. Accordingly, the reverse acquisition of the Company by SRC was accounted for by applying the purchase method and the principles of reverse acquisition accounting. Details of the reverse acquisition are set out in Note 2 to the financial statements for the years ended December 31, 2004 and 2005.
41
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (contd) FINANCIAL INSTRUMENTS Financial assets and financial liabilities are recognised on the Companys and Groups statements of financial position when the Company and Group become a party to the contractual provisions of the instrument. Effective interest method The effective interest method is a method of calculating the amortised cost of a financial instrument and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial instrument, or where appropriate, a shorter period. Income and expense is recognised on an effective interest rate basis for debt instruments. Financial assets Investments are recognised and de-recognised on a trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs. Other financial assets are classified into the following specified categories: available-for-sale financial assets and loan and receivables. The classification depends on the nature and purpose of financial assets and is determined at the time of initial recognition. Available-for-sale investment Certain shares and debt securities held by the Group are classified as being available-for-sale and are stated at fair value. Fair value is determined in the manner described in Note 4. Gains and losses arising from changes in fair value are recognised directly in the other comprehensive income with the exception of impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets which are recognised directly in profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the fair value reserve in other comprehensive income is included in profit or loss for the period. Dividends on available-for-sale equity instruments are recognised in profit or loss when the Groups right to receive payments is established. The fair value of available-for-sale monetary assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at end of the reporting period. The change in fair value attributable to translation differences that result from a change in amortised cost of the asset is recognised in profit or loss, and other changes are recognised in other comprehensive income. Loans and receivables Trade and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest method, except for short-term receivables when the recognition of interest would be immaterial. Impairment of financial assets Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. For financial assets carried at amortised cost, the amount of the impairment is the difference between the assets carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade and other receivables where the carrying amount is reduced through the use of an allowance account. When a trade and other receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss and against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.
42
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (contd) FINANCIAL INSTRUMENTS (contd) Financial assets (contd) Impairment of financial assets (contd) When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognised in other comprehensive income are reclassified to profit or loss. With the exception of available-for-sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through the profit or loss to the extent the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. In respect of available-for-sale equity instruments, impairment losses previously recognised in profit or loss are not reversed through profit or loss. Any subsequent increase in fair value after an impairment loss is recognised directly in other comprehensive income. Derecognition of financial assets The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. Financial liabilities and equity instruments Classification as debt or equity Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs. Financial liabilities Trade and other payables are initially measured at fair value net of transaction costs, and are subsequently measured at amortised cost, using the effective interest method, with interest expense recognised on an effective yield basis. Interest-bearing bank loans and overdrafts are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the Groups accounting policy for borrowing costs (see below). Derecognition of financial liabilities The Group derecognises financial liabilities when, and only when, the Groups obligations are discharged, cancelled or they expire.
43
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (contd) FINANCIAL INSTRUMENTS (contd) Financial liabilities and equity instruments (contd) Derivative financial instruments The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate risk. Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. The Group designates certain derivatives as either hedges of the fair value of recognised assets or liabilities or firm commitments (fair value hedges), hedges of highly probable forecast transactions or hedges of foreign currency risk of firm commitments (cash flow hedges), or hedges of net investments in foreign operations. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities. 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. Rental payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. INVENTORIES Development properties are those properties which are held with the intention of development and sale in the ordinary course of business. Development properties are stated at the lower of cost less proceeds on pre-sale received and receivable less any allowance considered necessary by the directors, and estimated net realisable value. Net realisable value represents the estimated selling price less cost to be incurred in selling the property. Costs of development properties comprise specifically identified costs, including land acquisition costs, aggregate cost of development, materials and supplies, wages and other direct costs. Interest and other holding costs applicable to properties under development are recognised as an expense in profit or loss as incurred. When it is probable that total development costs will exceed total revenue, an allowance is recognised as an expense in profit or loss immediately. Development properties are classified as current assets in the financial statements. Where proceeds on presale received and receivable exceed the amounts recoverable, they are classified as current liabilities.
44
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (contd) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are carried at cost less accumulated depreciation and any impairment losses. No depreciation is provided on freehold land. Depreciation on other property, plant and equipment is provided on a reducing balance basis over the estimated useful lives (or lease term, if shorter) of each part of an item of property, plant and equipment as follows: Freehold building Leasehold improvements Furniture and fittings Plant and office equipment Computers Motor vehicles 4% 20% 20% 10% to 60% 20% 20%
The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis. The gain or loss arising from the disposal or retirement of an item of property, plant and equipment asset is determined as the difference between the sales proceeds and the carrying amounts of the asset and is recognised in profit or loss. INVESTMENT IN INFRASTRUCTURE JOINT VENTURE The Groups investment in infrastructure project under co-operative joint venture arrangement is referred to as an infrastructure joint venture where the Groups cash returns to be derived from the joint venture are pre-determined subject to availability of distributable cash from the joint venture and the Group is not entitled to share the assets of the joint venture at the end of the joint venture period. Investment in infrastructure joint venture is stated at amortised cost using the effective interest method, less any impairment losses. Payments received from such investment are apportioned between income and reduction of the carrying value of the investment using an effective interest method. Where the estimated recoverable amount of any of this investment falls below its carrying value, an impairment loss is recognised in the income statement to reduce the carrying value of the investment to its recoverable amount. CLUB MEMBERSHIP Club membership is stated at cost less accumulated impairment losses. IMPAIRMENT OF ASSETS At the end of each reporting period, the Group review the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the assets is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash generating unit) is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
45
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (contd) IMPAIRMENT OF ASSETS (contd) When an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. INTERESTS IN JOINTLY CONTROLLED ENTITIES Jointly controlled entities are entities whereby the Group and other parties undertake an economic activity that is subject to joint control as established by contractual agreements and the strategic financial and operating policy decisions relating to the activities require the unanimous consent of the parties sharing control. The Groups interests in jointly controlled entities are accounted for using the equity method of accounting from the date that joint control commences until the date that joint control ceases. The financial statements include the Groups share of the income and expenses and equity movements, after adjustments to align the accounting policies with those of the Group. When the Groups share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest (including any long-term investments) is reduced to zero and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee. Where the Group transacts with its jointly controlled entities, unrealised profits and losses are eliminated to the extent of the Groups interest in the jointly controlled entities. PROVISIONS Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event where, it is probable that the Group will be required to settle that obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. SHARE-BASED PAYMENTS The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value of the equity instruments at the date of grant. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in Note 22. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the groups estimate of the number of equity instruments that will eventually vest. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity settled share option reserve. REVENUE RECOGNITION Revenue is measured at the fair value of the consideration received or receivable. Sale of development properties Revenue from sale of land or houses is recognised as each individual lot is sold and fully settled, and when all risks and rewards of ownership have been transferred to the buyer.
46
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (contd) REVENUE RECOGNITION (contd) Design and build contract revenue Contract revenue and costs are recognised in profit or loss using the percentage of completion method when the stage of contract completion can be reliably determined, costs to date can be clearly identified, and the following can be reliably estimated total contract revenue to be received; and costs to complete. The stage of completion is assessed with reference to surveys of work performed. An expected loss on a contract is recognised immediately in profit or loss. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that are likely to be recoverable and contract costs are recognised in profit or loss as an expense in the period in which they are incurred. Subsidy income Subsidy from joint venture partners is recognised as income on an accrual basis when there is reasonable assurance that it will be received. Dividend income Dividend income is recognised when the shareholders right to receive the payment has been established. Interest income Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable. Income from available-for-sale investment Income from available-for-sale investment is recognised in profits or loss when the right to receive payment has been established. BORROWING COSTS Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. RETIREMENT BENEFIT COSTS Payments to defined contribution retirement benefit plans (including state-managed retirement benefit schemes, such as the Singapore Central Provident Fund) are charged as an expense when incurred. EMPLOYEE LEAVE ENTITLEMENT Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the end of the reporting period. INCOME TAX Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in profit or loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not taxable or tax deductible. The Groups liability for current tax is calculated using tax rates (and tax laws) that have been enacted or substantively enacted in countries where the Company and subsidiaries operate by the end of the reporting period.
47
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (contd) INCOME TAX (contd) Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, except where the Group is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised based on the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items credited or debited outside profit or loss (either in other comprehensive income or directly in equity), in which case the tax is also recognised outside profit or loss (either in other comprehensive income or directly in equity, respectively) or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is taken into account in calculating goodwill or determining the excess of the acquirers interest in the net fair value of the acquirees identifiable assets, liabilities and contingent liabilities over cost. SHARE CAPITAL Ordinary share capital Ordinary share capital is classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity. Preference share capital Preference share capital is classified as equity if it is non-redeemable and any dividends are discretionary, or is redeemable but only at the Companys option. Dividends on preference share capital classified as equity are recognised as distributions within equity in the period in which they are declared. Preference share capital is classified as a liability if it is redeemable on a specific date or at the option of the shareholders or if dividend payments are not discretionary. Dividends thereon are recognised in profit or loss as interest expense on an accrual basis. FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION The individual financial statements of each Group entity are measured and presented in the currency of the primary economic environment in which the entity operates (its functional currency). The consolidated financial statements of the Group and the statement of financial position and statement of changes in equity of the Company are presented in Hong Kong dollars, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (contd) FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION (contd) In preparing the financial statements of the individual entities, transactions in currencies other than the entitys functional currency are recorded at the rates of exchange prevailing on the date of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the end of the reporting period. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on retranslation of monetary items are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in other comprehensive income. For such non-monetary items, any exchange component of that gain or loss is also recognised in other comprehensive income. For the purpose of presenting consolidated financial statements, the assets and liabilities of the Groups foreign operations (including comparatives) are expressed in Hong Kong dollars using exchange rates prevailing on the end of the reporting period. Income and expense items (including comparatives) are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in the Groups translation reserve. On the disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation accumulated in the Groups translation reserve, shall be reclassified from equity to profit or loss (as a reclassification adjustment) when the gain or loss on disposal is recognised. On consolidation, exchange differences arising from the translation of the net investment in foreign entities (including monetary items that, in substance, form part of the net investment in foreign entities), and of borrowings and other currency instruments designated as hedges of such investments, are recognised in other comprehensive income and accumulated in the translation reserve (attributed to minority interest, as appropriate). Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate. TOLL ROAD OPERATING RIGHTS The Groups jointly controlled entities were granted by the PRC authority the concessions to operate the expressways and highways, namely Guiliu Expressway, Guihuang Highway and Yuyao Highway during the pre-set operating period. The concession granted included the rights to redevelop and expand, invest, operate, manage and maintain the expressways and highways and their ancillary facilities and the rights to propose and collect toll incomes from vehicles using the expressways and highways and other fees relating to the expressways and highways and their ancillary facilities (the operating rights) during the operating period. In 2008, the Group adopted INT FRS 112 Service Concession Arrangements and had reclassified the toll road operating rights and the costs incurred on infrastructure from lease prepayments and property, plant and equipment, respectively, to intangibles. The operating rights are stated at cost less accumulated amortisation and impairment losses. Amortisation of the operating rights is based on an units-of-usage basis, calculated based on the proportion of actual traffic volume for a particular period to the projected total traffic volume over the lease term for the respective rights to operate the toll roads. The projected total traffic volume over the lease term of the respective toll roads is reviewed by the Group annually. Appropriate adjustments will be made should there be a material change in the projected total traffic volume. CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
49
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Groups accounting policies, which are described in Note 2, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Critical judgements in applying the entitys accounting policies Management is of the opinion that there are no instances of application of judgements that are expected to have a significant effect on the amounts recognised in the financial statements (apart from those involving estimations, which are dealt with below). Key sources of estimation uncertainty The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next year, are discussed below. Impairment of interest in jointly controlled entities The Group operates and manages 3 toll roads in China through its investments in jointly controlled entities. At the end of each reporting period, the Group considers quantitative information relating to the actual traffic volume and toll fee income and qualitative factors to determine whether there is any indication that these investments have suffered an impairment loss. If any such indication exists, the recoverable amount of the investment is estimated in order to determine the extent of the impairment loss (if any). The estimation of the recoverable amount of the investment based on value-in-use calculations requires the Group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Based on managements assessment, no impairment for the carrying value of the investment in jointly controlled entities is required at the end of the reporting period while an impairment charge of HK$168,000,000 was charged to profit or loss in 2009. Details of the impairment loss calculation are included in Note 14 to the financial statements. Carrying value of development properties The Group has development properties comprising undeveloped land, developed land and residential houses under construction and are stated at specifically identified costs less any allowance for foreseeable losses. Management reviews the development properties on a periodic basis, including comparison of the carrying value of these development properties with the respective net realisable value. In estimating the net realisable value of the development properties, management had used estimates of future costs and achievable recent sales prices over the Groups operating sales cycle. Management is satisfied that adequate allowance for foreseeable losses has been made in the financial statements. The carrying amount of the Groups development properties is disclosed in Note 9 to the financial statements. Impairment of investment in subsidiaries Determining whether investments in subsidiaries are impaired requires an estimation of the recoverable amount of the investment in subsidiaries as at the end of the reporting period. Management has estimated the recoverable amount based on the fair value less cost to sell and is satisfied that the recoverable amounts are higher than the carrying value of the subsidiaries. The fair value less cost to sell is determined by reference to the estimated realisable values of the net tangible assets of the subsidiaries. The carrying amounts of the Companys investments in subsidiaries are disclosed in Note 13 to the financial statements.
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FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (a) Categories of financial instruments The following table sets out the financial instruments as at the end of the reporting period: Group 2010 2009 HK$000 HK$000 Financial assets Loans and receivables (including cash and bank balances) Available-for-sale investment Financial liabilities Amortised cost Derivative financial liabilities (b) Company 2010 2009 HK$000 HK$000
1,301,803 128,874
1,082,656 77,105 154,711 1,028
879,686 1,206,737
661,514 802,866
Financial risk management objectives and policies The Group has a system of controls in place to create an acceptable balance between the cost of risks occurring and the cost of managing the risks. The management continually monitors the Groups risk management process to ensure that an appropriate balance between risk and control is achieved. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Groups activities. The Audit Committee oversees how management monitors compliance with the Groups risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Groups overall policy with respect to managing risk arising in the normal course of the Groups business as well as that associated with financial instruments is to minimise the potential adverse effects on the financial performance of the Group. The policies for managing specific risks are summarised below. (i) Foreign currency risk management The Group is exposed to foreign currency risk on certain income, expenses, monetary assets and liabilities that are denominated in currencies other than the functional currencies of the respective entities in the Group. The currencies giving rise to this risk are primarily the Chinese Renminbi and the Singapore dollar. The Group does not use derivative financial instruments to hedge its foreign currency risk. The Groups exposure to foreign currency risk relates mainly to its operations in the PRC, which are transacted in Chinese Renminbi. The Chinese Renminbi is not freely convertible into foreign currencies. Pursuant to the Regulations on the Administration of Foreign Exchange Settlement, Payment and Sale effective from July 1, 1996, foreign exchange required for the payment of dividends that are payable in foreign currencies under applicable regulations, such as dividends payable to the foreign partner of a co-operative joint venture, may be purchased from designated foreign exchange banks upon presentation of the board resolution authorising the distribution of dividends, together with the joint ventures audited financial statements and tax clearance documents from the relevant tax authorities. Upon termination of the co-operative joint ventures and provided that liquidation has been completed, taxes have been paid and the relevant PRC regulations including those of the State Administration for Foreign Exchange have been complied with, the Chinese Renminbi funds belonging to the Group may be remitted or brought out of the PRC in foreign exchange purchased from designated foreign exchange banks.
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FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (contd) (b) Financial risk management objectives and policies (contd) (i) Foreign currency risk management (contd) At the end of the reporting period, the carrying amounts of monetary assets, monetary liabilities and available-for-sale investments denominated in currencies other than the respective Group entities functional currencies are as follows: Group Assets 2010 HK$000 United States dollars Singapore dollars Chinese Renminbi 874,273 32,651 16,497 2009 HK$000 573,084 74,952 145,060 Liabilities 2010 2009 HK$000 HK$000 13,297 80 7,825 38,504 Assets 2010 HK$000 488,624 32,493 322,657 2009 HK$000 245,301 74,807 302,957 Company Liabilities 2010 2009 HK$000 HK$000 13,206 80 7,770 16
The above carrying amounts include intercompany balances that are not denominated in the functional currencies of the respective entities and are eliminated on consolidation. Foreign currency sensitivity The following table details the sensitivity to a 10% increase or decrease in the relevant foreign currencies against the functional currency of each Group entity. 10% is the sensitivity rate representing managements assessment of the possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. The sensitivity analysis includes external loans as well as loans to foreign operations within the Group where they give rise to an impact on the Groups profit or loss and/or equity. If the relevant foreign currency strengthens by 10% against the functional currency of each Group entity, profit or loss and other equity will increase or (decrease) by: United States dollar impact 2010 2009 HK$000 HK$000 Group Profit or loss Other equity Company Profit or loss 87,427 48,862 57,308 24,530 Singapore dollar impact 2010 2009 HK$000 HK$000 1,935 1,929 6,713 6,704 Chinese Renminbi impact 2010 2009 HK$000 HK$000 1,642 32,258 2,945 7,711 30,294
If the relevant foreign currency weakens by 10% against the functional currency of each Group entity, profit or loss and other equity will increase or (decrease) by: United States dollar impact 2010 2009 HK$000 HK$000 Group Profit or loss Other equity Company Profit or loss (87,427) (48,862) (57,308) (24,530) Singapore dollar impact 2010 2009 HK$000 HK$000 (1,935) (1,929) (6,713) (6,704) Chinese Renminbi impact 2010 2009 HK$000 HK$000 (1,642) (32,258) (2,945) (7,711) (30,294)
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FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (contd) (b) Financial risk management objectives and policies (contd) (ii) Interest rate risk management The Groups exposure to market risk for changes in interest rates relates primarily to the Groups secured NZ$ bank loan. From time to time, the Group may enter into interest rate swaps, which are denominated in NZ dollar to hedge the interest rate exposure. As at December 31, 2010, there are no outstanding interest rate swaps held by the Group. In 2009, the Group had an interest rate swap with a notional amount of NZ$5 million whereby it paid fixed rate at 8.1% per annum and received variable interest rates on the notional amounts. The net fair value of interest rate swaps at December 31, 2009 was NZ$182,000. Interest rate sensitivity The sensitivity analyses below have been determined based on the exposure to interest rates for bank deposits and interest bearing financial liabilities at the end of the reporting period and the stipulated change taking place at the beginning of the year and held constant throughout the reporting period in the case of instruments that have floating rates. A 100 basis point increase or decrease is used and represents managements assessment of the possible change in interest rates. If interest rates had been 100 basis points higher or lower and all other variables were held constant, the profit for the year ended December 31, 2010 of the Group would increase/ decrease by HK$662,000 (2009: HK$66,000). No impact is expected on the Companys profit for the year. (iii) Credit risk management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has a credit policy in place which establishes credit limits for customers and monitors their balances on an ongoing basis. Mortgage advances granted by the Group are secured by mortgages over the residential properties sold to customers. Cash and fixed deposits are placed with banks and financial institutions which are regulated. Investments in securities are allowed only with counterparties who have sound credit ratings. At the end of the reporting period, there was no significant concentration of credit risk other than the subsidy receivable due from Sino joint venture partners disclosed in Note 7. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statements of financial position. (iv) Liquidity risk management Liquidity risk is the risk that the Group will not be able to meet its financial obligations as and when they fall due. The Groups approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity by maintaining sufficient reserves of cash and adequate committed lines of funding from major financial institutions to meet its liabilities when due, under both normal and stressed condition, without incurring unacceptable losses or risking damage to the Groups reputation. The Groups financial instruments are all due within 1 year.
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FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (contd) (b) Financial risk management objectives and policies (contd) (v) Fair value of financial assets and financial liabilities The carrying amounts of cash and cash equivalents, trade and other current receivables and payables approximate their respective fair values due to the relatively short-term maturity of these financial instruments. For 2009, the fair values of other classes of financial assets and liabilities are disclosed in the respective notes to financial statements. The fair values of these financial assets and financial liabilities are determined as follows: (i) the fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices; and the fair value of other financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis.
(ii)
The Group classifies fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels: (a) (b) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1); inputs other than quoted prices included within Level 1 that are observable for the asset or liability; either directly (i.e. as prices) or indirectly (i.e. derived from prices) (Level 2); and inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3). Level 1 HK$000 Group December 31, 2009 Available-for-sale investment Derivative financial liability (1,028) (1,028) 77,105 77,105 77,105 (1,028) 76,077 Level 2 HK$000 Level 3 HK$000 Total HK$000
(c)
There were no significant transfers between Level 1 and Level 2 of the fair value hierarchy during the financial year. Derivatives The estimated fair values of derivative financial instruments are based on quotes obtained from reputable financial institution. These quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of the contract and using market interest rates for a similar instrument at the measurement date. (c) Capital risk management policies and objectives The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance except where decisions are made to exit businesses or close companies.
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FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (contd) (c) Capital risk management policies and objectives (contd) The capital structure of the Group consists of debts, which includes the borrowings disclosed in Note 18 and equity attributable to owners of the Company, comprising issued capital and reserves as disclosed in Notes 20 and 21. The Group is in compliance with externally imposed capital requirements for the financial years ended December 31, 2010 and 2009. The review of the Groups capital risk management policies and objectives is conducted by the Audit Committee and the Board. The Groups overall strategy remains unchanged from 2009.
RELATED PARTY TRANSACTIONS Related parties are entities with common direct or indirect shareholders and/or directors. Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions. Compensation of directors and key management personnel The remuneration of directors and other members of key management during the year was as follows: Group 2010 HK$000 Short-term employee benefits Post-employment benefits 9,247 464 9,711 2009 HK$000 9,014 327 9,341 Company 2010 2009 HK$000 HK$000 7,637 424 8,061 7,612 291 7,903
Included in key management personnel compensation is directors remuneration of HK$4,879,000 (2009: HK$4,308,000). Directors also participate in the Groups employee share option scheme. At the end of the reporting period, 2,110,000 (2009: 2,110,000) share options granted to the directors of the Company were outstanding. 6 CASH AND CASH EQUIVALENTS Group 2010 HK$000 Cash at bank and in hand Fixed deposits with banks Cash and cash equivalents 32,693 1,249,681 1,282,374 2009 HK$000 677,452 334,659 1,012,111 Company 2010 2009 HK$000 HK$000 10,796 545,560 556,356 22,834 334,659 357,493
The effective interest rates per annum of cash and cash equivalents at the reporting date range from 0.05% to 1.35% (2009: 0.05% to 1.35%) per annum and is 0.05% to 0.54% (2009: 0.05% to 0.4375%) per annum for the Group and the Company, respectively. Interest rates reprice at intervals of one to three months. The Companys and Groups cash and bank balances that are not denominated in the functional currencies of the respective entities are as follows: Group 2010 HK$000 United States dollars Singapore dollars 874,209 31,846 2009 HK$000 573,010 73,801 Company 2010 2009 HK$000 HK$000 488,560 31,688 245,227 73,656
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TRADE AND OTHER RECEIVABLES Group 2010 HK$000 Amounts due from subsidiaries (non-trade) Subsidy receivable from Sino joint venture partners Interest receivable Deposits Prepayments Other receivables 16,497 1,444 600 2,806 888 22,235 2009 HK$000 67,955 77 799 2,731 1,641 73,203 Company 2010 2009 HK$000 HK$000 322,657 64 520 196 89 323,526 302,957 77 799 167 188 304,188
The amounts due from subsidiaries are unsecured and interest-free, and are repayable on demand. The Company has recognised an allowance for doubtful debts for amount due from subsidiaries of HK$7,432,000 (2009: HK$6,223,000) in respect of amounts considered not recoverable. Included in the Groups trade and other receivables are balances with a carrying amount of HK$18,829,000 (2009: HK$69,673,000) that are neither past due nor impaired. Based on historical default rates, the Group and Company believe that no impairment allowance is necessary in respect of trade and other receivables not past due. These receivables are mainly arising from entities that have a good record with the Group. The Groups and Companys trade and other receivables that are not denominated in the functional currencies of the respective entities are as follows: Group 2010 HK$000 United States dollars Singapore dollars Chinese Renminbi 8 MORTGAGE ADVANCES Mortgage advances relate to financing extended to home-buyers of residential houses constructed and sold by the Group. In 2009, these NZ$ advances were secured by mortgages over the residential properties and bore interest at an effective interest rate of 10.75% per annum at the reporting date. The interest rate was repriceable within one year. 9 INVENTORIES Group 2010 HK$000 Development properties Cost of land Development costs Progress billings 345,620 50,460 396,080 325 396,405 2009 HK$000 328,830 41,576 370,406 (102) 370,304 64 805 16,497 2009 HK$000 74 1,151 67,955 Company 2010 2009 HK$000 HK$000 64 805 322,657 74 1,151 302,957
The development properties are mortgaged to a bank for banking facilities granted to certain subsidiaries.
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10
LOAN TO AN INFRASTRUCTURE JOINT VENTURE In 2009, the loan to an infrastructure joint venture was secured and bore interest at an effective interest rate of 5.76% per annum at the reporting date. Interest rates were repriced at intervals of three months.
11
AVAILABLE-FOR-SALE INVESTMENT Group 2010 HK$000 Unquoted equity shares, at fair value 2009 HK$000 77,105
Details of the Groups infrastructure joint venture classified as available-for-sale investment are as follows: Place of establishment and business Effective equity held by the Group 2010 2009 % % 33.4
Name of joint venture
Principal activities
Luoding City Luomei Highways Company Limited
Operation of toll road
Peoples Republic of China
Luoding City Luomei Highways Company Limited (the Luomei JV) is a Sino-foreign co-operative joint venture established in the PRC with an operating period of 25 years expiring on June 2, 2021. According to the terms of the original and supplemental joint venture agreements, the Group was entitled to receive pre-determined cash returns from Luomei JV during the first 20 years of its operating period subject to the availability of Luomei JVs distributable cash but was not entitled or obliged to share its operating results. Thereafter, the Group was not entitled to receive any cash returns from Luomei JV or share its operating results. Should the distributable cash of Luomei JV be insufficient to pay for the pre-determined cash returns to the Group, the shortfall shall be paid by the Sino joint venture partners. The Groups entitled cash returns are secured by the Sino joint venture partners pledge of their interests in the registered capital of Luomei JV. The obligation of the Sino joint venture partners to pay for any shortfall in the Groups entitled cash returns from Luomei JV is in turn guaranteed by corporate guarantees provided by two related parties of the Sino joint venture partners. Upon expiration of Luomei JVs operating period, the Group is not entitled to share the residual assets of Luomei JV as all such assets shall be transferred to the Sino joint venture partners without compensation. Investment in the above infrastructure joint venture had been reclassified as available-for-sale investment following the decision of the Groups management to dispose of the Groups entire interest in the joint venture in 2008. A sale and purchase agreement (S&P Agreement) was entered on October 7, 2008 to dispose of the Groups entire 33.4% equity interest in the Luomei JV for a cash consideration of Rmb68 million. In the prior year, the Group received HK$38.7 million (equivalent to Rmb34 million) from the acquirer as deposits for this transaction (see Note 17). During the year, the sale was completed in January 2010, following the fulfillment of the terms and conditions of the S&P Agreement by both parties, including the receipt of the remaining balance of HK$38.6 million (equivalent to Rmb34 million). The Groups available-for-sale investment is denominated in Chinese Renminbi.
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12
PROPERTY, PLANT AND EQUIPMENT Freehold Furniture land and Leasehold and building improvements fittings HK$000 HK$000 HK$000 Group Cost: At January 1, 2009 Additions Disposals Exchange differences At December 31, 2009 Additions Disposals Exchange differences At December 31, 2010 Accumulated depreciation: At January 1, 2009 Depreciation Eliminated on disposals Exchange differences At December 31, 2009 Depreciation Eliminated on disposals Exchange differences At December 31, 2010 Carrying amount: At December 31, 2010 At December 31, 2009 Plant and office equipment HK$000 Motor vehicles HK$000
Computers HK$000
Total HK$000
9,672 2,479 12,151 813 12,964
356 356 356
94 94 2 1 97
5,492 93 (570) 1,304 6,319 764 (99) 465 7,449
391 29 1 421 126 (158) 3 392
531 531 2 533
16,536 122 (570) 3,784 19,872 892 (257) 1,284 21,791
886 248 260 1,394 270 113 1,777
211 29 240 23 263
49 8 57 9 66
2,871 655 (332) 764 3,958 744 (62) 309 4,949
184 51 1 236 64 (127) 3 176
309 40 349 32 381
4,510 1,031 (332) 1,025 6,234 1,142 (189) 425 7,612
11,187 10,757
93 116
31 37
2,500 2,361
216 185
152 182
14,179 13,638
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12
PROPERTY, PLANT AND EQUIPMENT (contd) Leasehold improvements HK$000 Company Cost: At January 1, 2009 Additions At December 31, 2009 Additions Disposals At December 31, 2010 Accumulated depreciation: At January 1, 2009 Depreciation At December 31, 2009 Depreciation Eliminated on disposals At December 31, 2010 Carrying amount: At December 31, 2010 At December 31, 2009 Furniture and fittings HK$000 Office equipment HK$000 Motor vehicles HK$000
Computers HK$000
Total HK$000
497 497 497
172 172 2 174
171 14 185 8 (9) 184
358 2 360 98 (158) 300
959 959 959
2,157 16 2,173 108 (167) 2,114
353 28 381 23 404
134 6 140 7 147
121 14 135 11 (6) 140
245 22 267 32 (127) 172
758 40 798 32 830
1,611 110 1,721 105 (133) 1,693
93 116
27 32
44 50
128 93
129 161
421 452
The freehold land and building of the Group are mortgaged to a bank for banking facilities granted to certain subsidiaries (see Note 18). 13 INTERESTS IN SUBSIDIARIES Company 2010 HK$000 Investments in subsidiaries, at cost Loans to subsidiaries Impairment losses 761,070 2,547,336 3,308,406 (89,634) 3,218,772 2009 HK$000 605,909 2,547,331 3,153,240 (89,634) 3,063,606
The loans to subsidiaries are interest-free, unsecured and settlement is neither planned nor likely to occur in the foreseeable future. These loans form part of the Companys net investments in the subsidiaries.
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13
INTERESTS IN SUBSIDIARIES (contd) Details of the Companys significant subsidiaries are as follows: Country of incorporation and operation Effective equity held by the Company 2010 2009 % % 100 100 100 100
Name of subsidiary
China Merchants Pacific (NZ) Limited (1) and its subsidiaries: Universal Homes Limited(1)
New Zealand New Zealand
Investment holding Development of land and the construction and sale of residential housing Providing finance for the purchase of private residential housing Providing finance for the purchase of private residential housing Inactive Provision of management and technical services in Toll road and other Infrastructure related Businesses Investment holding
Residential Finance Limited
(1)
New Zealand
100
100
The Home Loan Company Limited (1) Day Castle Investment Limited China Merchants Pacific Infrastructure Management (Shenzhen) Co., Ltd (2)
(1)
New Zealand
100
100
Hong Kong Peoples Republic of China (PRC)
100 100
100 100
China Merchants Pacific (Shenzhen) Investment Co., Ltd (2) Successful Road Corporation (3) Successful Road Corporation (S) Pte. Ltd.(4) and its subsidiaries (5): Zheyu One Highway Pte. Ltd. Zheyu Two Highway Pte. Ltd.
(4) (4) (4)
PRC
100
100
British Virgin Island Singapore Singapore Singapore Singapore Singapore

(4)
Investment holding Investment holding Investment holding Investment holding Investment holding Investment holding Investment holding Liquidated Liquidated Investment holding Investment holding Investment holding Investment holding
100 100 100 100 100 100 100 100 100 100 100
100 100 100 100 100 100 100 100 100 100 100 100 100
Zheyu Three Highway Pte. Ltd. Yuexi Highway Pte. Ltd.

(4)
Yushao Expressway Pte. Ltd. Shenzhen Hanfu Road Development Co. Ltd Shenzhen Yananxing Road Development Co. Ltd Yudeng Expressway Pte. Ltd. Xinan Expressway Pte. Ltd. Guijin Expressway Pte. Ltd.
(4) (4)
Singapore PRC PRC
(4)
Singapore Singapore Singapore Singapore
Guiyun Expressway Pte. Ltd.
(4)
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INTERESTS IN SUBSIDIARIES (contd)

(1) (2) (3) (4) (5) Audited by other member firms of Deloitte Touche Tohmatsu Limited. Audited by Shenzhen Zhengfeng Lifu Certified Public Accountants, a member of the Chinese Institute of Certified Public Accountants, for statutory purposes. The financial statements of Successful Road Corporation (SRC) are not required to be audited by the law of its country of incorporation. Audited by Deloitte & Touche LLP, Singapore. Audited by other member firm of Deloitte Touche Tohmatsu Limited for consolidation purposes.
14
INTERESTS IN JOINTLY CONTROLLED ENTITIES Group 2010 HK$000 Investments in jointly controlled entities Impairment losses Loans to jointly controlled entities 2,117,185 (268,006) 1,849,179 516,364 2,365,543 2009 HK$000 2,120,093 (268,006) 1,852,087 586,309 2,438,396
The loans to jointly controlled entities are unsecured and interest-free, and settlement is neither planned nor likely to occur in the foreseeable future. These loans form part of the Groups net investments in the jointly controlled entities. Details of the jointly controlled entities are as follows: (i) The Guiliu Expressway located in Guangxi, PRC, is operated by 12 joint venture companies (the Guiliu JVs). The Guiliu JVs are Sino-foreign co-operative joint ventures established in the PRC with operating periods expiring on December 31, 2024. Details of the Guiliu JVs are as follows: Place of establishment and business Effective equity held by the Group 2010 2009 % % 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40
Name of jointly controlled entity
Guangxi Fushan Infrastructure Facilities Co., Ltd. (1) Guangxi Guida Infrastructure Co., Ltd. Guangxi Liugui Highway Co., Ltd. Guangxi Liujing Highway Co., Ltd.
(1) (1) (1)
PRC PRC PRC PRC PRC PRC PRC PRC PRC PRC
(1)
Operation of toll road Operation of toll road Operation of toll road Operation of toll road Operation of toll road Operation of toll road Operation of toll road Operation of toll road Operation of toll road Operation of toll road Operation of toll road Operation of toll road
Guangxi Luqing Highway Construction Co., Ltd. (1) Guangxi Xincun Highway Management Co., Ltd. (1) Guangxi Rongzhu Highway Construction Co., Ltd. (1) Guangxi Huangli Highway Surface Management Co., Ltd. (1) Guangxi Wanli Highway Engineering Co., Ltd. (1) Guangxi Wushi Highway Co., Ltd.
(1)
Guangxi Xinya Engineering Co., Ltd. Guangxi Zhenxing Infrastructure Co., Ltd. (1)
PRC PRC
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INTERESTS IN JOINTLY CONTROLLED ENTITIES (contd) (ii) The Guihuang Highway located in Guizhou, PRC, is operated by 4 joint venture companies (the Guihuang JVs). The Guihuang JVs are Sino-foreign co-operative joint ventures established in the PRC with operating periods expiring on April 15, 2027. Details of the Guihuang JVs are as follows: Place of establishment and business Effective equity held by the Group 2010 2009 % % 60 60 60 60 60 60 60 60
Guizhou Jinguan Highway Co., Ltd. (2) Guizhou Jinhua Highway Co., Ltd. (2) Guizhou Pantao Highway Co., Ltd. (2) Guizhou Yunguan Highway Co., Ltd. (2) (iii)
PRC PRC PRC PRC
Operation of toll road Operation of toll road Operation of toll road Operation of toll road
The Yuyao Highway located in Zhejiang province, PRC, is operated by 6 joint venture companies (the Yuyao JVs). The Yuyao JVs are Sino-foreign co-operative joint ventures established in the PRC with operating periods expiring on March 12, 2025. Details of the Yuyao JVs are as follows: Place of establishment and business Effective equity held by the Group 2010 2009 % % 60 60 60 60 60 60 60 60 60 60 60 60
Ningbo Baoshun Infrastructure Development Co., Ltd. (3) Ningbo Deshun Transportation Management Co., Ltd. (3) Ningbo Gangshun Communications Development Co., Ltd. (3) Ningbo Longshun Roads Development Co., Ltd. (3) Ningbo Yashun Roads & Bridges Co., Ltd. (3) Ningbo Yishun Roads Engineering Co., Ltd. (3)
(1) (2) (3)
PRC PRC PRC PRC PRC PRC
Operation of toll road Operation of toll road Operation of toll road Operation of toll road Operation of toll road Operation of toll road
Audited by Beijing Huatongjian Certified Public Accountants Co., Ltd. Guangxi Branch, a member of the Chinese Institute of Certified Public Accountants, for statutory purposes. Audited by Zhonghe Zhengxin Certified Public Accountants Co., Ltd., a member of the Chinese Institute of Certified Public Accountants, for statutory purposes. Audited by Ningbo Guotai Certified Public Accountants, a member of the Chinese Institute of Certified Public Accountants, for statutory purposes.
For the purpose of consolidation, the financial statements of the jointly controlled entities for the year ended December 31, 2010 have been audited by another member firm of Deloitte Touche Tohmatsu Limited.
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INTERESTS IN JOINTLY CONTROLLED ENTITIES (contd) The Groups profit/cash sharing entitlements in Guiliu JVs, Guihuang JVs and Yuyao JVs differ from the proportion of the registered capital held by the Group in each of these joint ventures for the periods as follows: (a) For Guiliu JVs, the Group was entitled to share 90% of the JVs profit/cash during the period from January 1, 2000 to December 31, 2009; For Guihuang JVs, the Group is entitled to 100% of the JVs profit/cash during the period from January 1, 2000 to December 31, 2014; and For Yuyao JVs, the Group is entitled to share 90%, 85%, 70%, 65%, 60% and 50% of the JVs profit/ cash during the first, second, third, fourth, fifth to eighth, and ninth to fifteenth year of their operating period commencing on March 13, 2000, respectively.
(b)
(c)
Thereafter, the profit/cash sharing ratios of the Group in the above joint ventures will be the same as the proportion of the registered capital held by the Group in each of these joint ventures. Pursuant to the respective joint venture agreements of Guiliu JVs, Guihuang JVs and Yuyao JVs, the respective jointly controlled entities have the rights to operate and collect tolls from the Guiliu Expressway, Guihuang Highway and Yuyao Highway for a period of 25 to 30 years from the respective dates of commencement of their operations. Upon expiration of the operating periods of the above joint ventures, all property, plant and equipment of these joint ventures shall be transferred to the respective Sino joint venture partners without compensation. The aggregate assets and liabilities of the jointly controlled entities at the end of the reporting period are as follows: Group 2010 HK$000 Assets and liabilities Toll road operating rights Other non-current assets Non-current assets Current assets Total assets Non-current liabilities Current liabilities Total liabilities 3,630,360 188,544 3,818,904 432,004 4,250,908 970,707 153,528 1,124,235 2009 HK$000 3,714,447 135,941 3,850,388 467,729 4,318,117 1,251,344 164,146 1,415,490
As at December 31, 2009, toll road operating rights of Guiliu Expressway of HK$2,007,169,000 were pledged as security against a bank loan of HK$113,572,000 by the Guiliu JVs. The bank loan was fully repaid in 2010.
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INTERESTS IN JOINTLY CONTROLLED ENTITIES (contd) The Groups share of the assets and liabilities of the jointly controlled entities has not been disclosed as such assets and liabilities cannot be allocated to the Group on a reasonable basis given that the Groups profit-sharing ratios in the jointly controlled entities for certain years of their operating periods are different from the proportion of the ownership interest held by the Group in each of these jointly controlled entities. The Groups share of the jointly controlled entities results is as follows: Group 2010 HK$000 Results Revenue Expenses Profit after tax 772,775 (537,176) 235,599 2009 HK$000 643,837 (353,708) 290,129
At December 31, 2010, the carrying amount of the Groups investments in jointly controlled entities of HK$1,849,179,000 (2009: HK$1,852,087,000) included the Groups share of the post-acquisition results of the jointly controlled entities. In arriving at the Groups share of post-acquisition results of the jointly controlled entities, the lease prepayment for the toll road operating right owned by each jointly controlled entity was amortised on an units-of-usage basis, calculated based on the proportion of actual traffic volume for a particular period to the projected total traffic volume over the lease term for which the jointly controlled entity is granted the right to operate the toll road. The projected total traffic volume over the lease term of each toll road was estimated based on certain assumptions concerning the future. Should the actual traffic volume deviate significantly from the original projected traffic volume, the amortisation of the jointly controlled entities toll road operating rights may be significantly affected and this could result in a material adjustment to the carrying amount of the Groups investments in the jointly controlled entities in 2011. Impairment of interest in jointly controlled entities In 2009, the Yuyao JVs, which formed part of the Toll road operations operating segment, experienced a significant drop in traffic volume and consequently the economic performance of Yuyao JVs is worse than expected. The management considered that the existence of the above conditions indicated that the Groups interests in jointly controlled entities in the PRC may be impaired. In view of this, the management prepared a cash flow projection to estimate the recoverable amount of these JVs. The estimates of recoverable amount from interests in jointly controlled entities were determined based on the value-in-use of Yuyao JVs expected free cash flow up to the end of its toll road operating rights, and a pre-tax discount rate. Key assumptions used for the value in use calculation: Revenue growth rate Pre-tax discount rate 2% 19% 17.7%
The management determined the growth rate and gross contribution rate based on the expectation for market development of the PRC. The management concluded that it was appropriate to recognise an impairment loss of HK$168,006,000 against investments in jointly controlled entities, charged to profit or loss under Other operating expenses in 2009.
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CLUB MEMBERSHIP Group 2010 HK$000 Club membership, at cost Impairment losses 376 376 2009 HK$000 376 376 Company 2010 2009 HK$000 HK$000 896 (520) 376 896 (520) 376
16
DEFERRED TAXATION The following are the major deferred tax liabilities and assets recognised by the Group and Company, and the movements thereon, during the current and prior reporting periods: Group 2010 HK$000 Deferred tax assets Deferred tax liabilities Net assets (liabilities) 12,380 12,300 80 2009 HK$000 14,032 21,710 (7,678)
Movements in deferred tax assets and liabilities of the Group during the year are as follows:
Distributable profit from jointly controlled entities (Note b) HK$000 (10,600) (14,000) 10,600 (14,000) (12,483) 14,183 (12,300)
Availablefor-sale investment HK$000 Group At January 1, 2009 Credit (charge) to profit or loss Utilisation Exchange differences At December 31, 2009 Credit (charge) to profit or loss Credit (charge) to other comprehensive income Utilisation Exchange differences At December 31, 2010 (7,710) (7,710) 1,403 6,307
Provisions and accelerated tax depreciation HK$000 4,524 (1,288) 980 4,216 (2,594) 83 1,705
Tax losses (Note a) HK$000 3,692 4,546 1,578 9,816 190 669 10,675
Total HK$000 (10,094) (10,742) 10,600 2,558 (7,678) (13,484) 6,307 14,183 752 80
(a)
Deferred tax assets are recognised to the extent that realisation of the related tax benefits through future taxable profits is probable. The deferred tax asset recognised is based on the 2011 budget, a 5-year business plan and the forecasted taxable profits of the subsidiaries for which the tax losses relate to.
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16
DEFERRED TAXATION (contd) (b) Pursuant to the new Corporate Income Tax Law of the PRC which took effect on January 1, 2008, the Group will be liable to 5% withholding tax on dividends distribution from the Groups foreigninvested enterprises in respect of its profit generated from January 1, 2008. Movement of deferred tax liabilities arising from distributable profits of the PRC jointly controlled entities generated and are expected to be distributed in the foreseeable future are as follows: 2010 HK$000 At January 1 Underprovision in prior year Charged for the year Utilisation 14,000 183 12,300 (14,183) 12,300 (c) 2009 HK$000 10,600 14,000 (10,600) 14,000
At December 31, 2010, deferred tax liability for taxable temporary differences of HK$889,519,000 (2009: HK$757,101,000) related to investments in certain subsidiaries and jointly controlled entities was not recognised because the Company controls whether the liability will be incurred and it is satisfied that it will not be incurred in the foreseeable future. The following deductible temporary difference has not been recognised: Group 2010 HK$000 Tax losses 93,363 2009 HK$000 80,820 Company 2010 2009 HK$000 HK$000 73,899 73,899
(d)
The tax losses are subject to agreement by tax authorities and compliance with tax regulations in the respective countries in which the Company and certain subsidiaries operate. Deferred tax assets have not been recognised in respect of the tax losses due to uncertainty in the availability of future taxable profit against which the Group and the Company can utilise the tax losses. 17 TRADE AND OTHER PAYABLES Group 2010 HK$000 Trade payables Deposit received (Note 11) Amount due to subsidiary (non-trade) Goods and services tax payable Withholding tax payable Unclaimed dividends Other payables and accruals Derivatives 32,381 113 10 48 2,078 17,856 52,486 2009 HK$000 63,654 38,663 130 1,713 12,098 1,028 117,286 Company 2010 2009 HK$000 HK$000 1,193,322 2,078 11,337 1,206,737 794,944 1,713 6,209 802,866
The amount due to subsidiary is unsecured and interest-free, and is repayable on demand. The Companys and Groups trade and other payables that are not denominated in the functional currencies of the respective entities are as follows: Group 2010 HK$000 Singapore dollars Chinese Renminbi 13,297 80 2009 HK$000 7,825 38,504 Company 2010 2009 HK$000 HK$000 13,206 80 7,770 16
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18
INTEREST-BEARING LIABILITIES Interest-bearing liabilities relate to New Zealand dollar denominated bank loans that are secured by (a) first mortgage over the freehold land and building (see Note 12); and (b) first floating charge debenture over all the assets (including the development properties (see Note 9)) of China Merchants Pacific (NZ) Limited and its subsidiaries, with an aggregate carrying value of HK$427,919,000 (2009: HK$417,678,000). The bank loans are cross-guaranteed and indemnified from and between China Merchants Pacific (NZ) Limited and its subsidiaries. The effective interest rate of the bank loans at the reporting date is 5.02% (2009: 4.71%) per annum and the interest rate is repriced monthly. The above banking facilities were renegotiated in 2010 and had been extended to October 31,2011.
19
PROVISION FOR WARRANTIES Group 2010 HK$000 At 1 January Provision made Provision used Translation differences At 31 December 10,220 1,071 (1,937) 767 10,121 2009 HK$000 13,433 372 (6,217) 2,632 10,220
The provision for warranties is based on managements best estimates of total cost to repair the affected houses in respect of the Groups development properties. The total costs have been apportioned to other entities involved in the claims and the Group has recognised its portion of the claim. The work is expected to be completed over 1 to 3 years. 20 SHARE CAPITAL The issued and paid-up share capital comprise ordinary shares and redeemable convertible preference shares (RCPS) and are as follows: Group and Company Ordinary shares RCPS No. of No. of Shares shares (000) HK$000 (000) HK$000 Issued and fully paid: At January 1, and December 31 2009 Conversion of RCPS At December 31, 2010 582,635 135,781 718,416 1,744,856 492,056 2,236,912 271,562 (135,781) 135,781 984,111 (492,056) 492,055
Total
HK$000 2,728,967 2,728,967
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. The holder of the RCPS is entitled to vote at meetings of the Company only on resolutions for varying the rights attached to the RCPS or for the winding up of the Company. All shares rank equally with regard to the Companys residual assets except that the holder of the RCPS participates only to the extent of S$0.50 (being the par value of the RCPS prior to January 30, 2006). The RCPS confer upon the holder the following rights: (a) Right to receive a fixed non-cumulative preference dividend per share at the rate of 1.5% per annum calculated on S$0.50 (being the par value of the RCPS prior to January 30, 2006). The said dividend shall be paid in priority to any dividend or distribution in favour of holders of other classes of shares in the Company.
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20
SHARE CAPITAL (contd) (b) Right to convert the RCPS into fully paid ordinary shares in the capital of the Company subject to the following conditions: (i) Subject to Note (b)(iii) below, the holder of the RCPS shall be entitled, at any time after the date falling on the third anniversary of the date of issue of the RCPS (the Third Anniversary), to convert any of the RCPS into ordinary shares. Notwithstanding Note (b)(i) above, if at any time prior to the Third Anniversary, there is any proposal to change or vary the share capital of the Company (the Proposal) which will result in the holder of the RCPS owning less than 35% of the total number of ordinary shares issued in the capital of the Company after such Proposal is effected, the holder of the RCPS shall be entitled, subject to completion of the Proposal, to convert such number of RCPS as may be necessary so that it will hold up to but not more than 35% of the total number of ordinary shares issued in the capital of the Company upon such Proposal being effected. Subject to note (d) below, prior to each anniversary after the Third Anniversary, the holder of the RCPS shall be entitled to convert up to one third of the total number of RCPS issued on the date of issue. The holder of the RCPS shall be entitled to convert the RCPS into fully paid ordinary shares of the Company at the conversion rate of one ordinary share of the Company for every RCPS. The right to convert shall be exercisable by the holder of the RCPS by delivering to the Company not less than 21 days notice in writing (the Notice Period) of its desire so to convert (the Conversion Notice), such notice to specify the number of RCPS it desires to convert and accompanied by the share certificate(s) covering such shares. A Conversion Notice, once given, may not be withdrawn without the consent in writing of the Company. The ordinary shares, which are issued as a result of the conversion of the RCPS, shall rank pari passu in all respects with the then existing ordinary shares in the capital of the Company.
(ii)
(iii)
(iv)
(v)
(vi)
The Company is entitled to the following redemption rights in respect of the RCPS: (c) The Company shall, prior to each anniversary after the Third Anniversary, be entitled to redeem up to one third of the total number of RCPS issued on the date of issue. For the avoidance of doubt, in the event the holder of the RCPS exercises its conversion right in note (b)(iii) above and the Company, during the Notice Period, exercises its right of redemption in note (c) and the number of outstanding RCPS is insufficient for a conversion as well as a redemption, the Companys right to redeem shall take priority. The Company shall exercise its right of redemption by giving not less than 7 days prior notice of redemption (the Redemption Notice) specifying the number of RCPS to be redeemed. The redemption price for each RCPS shall be S$0.761.
(d)
(e)
(f) 21
RESERVES Share option reserve The share option reserve comprises the cumulative value of employee services received for the issue of share options. When the share option is exercised, the related balance previously recognised in the share option reserve is transferred to share capital. When the share options expire, the related balance previously recognised in the share option reserve is transferred to accumulated profits. Further information about sharebased payments to employees is set out in Note 22 of the financial statements.
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21
RESERVES (contd) Statutory reserve The Groups jointly controlled entities follow the accounting principles and relevant financial regulations of the Peoples Republic of China (PRC GAAP) applicable to Sino-foreign co-operative joint venture enterprises in the preparation of their accounting records and statutory financial statements. According to the Articles of Association of the jointly controlled entities, they are required to transfer certain amounts from their profit after taxation to statutory reserve. The transfers to the reserve must be made before the distribution of dividends to equity owners. The percentage of appropriation is at the discretion of the directors of the jointly controlled entities. The appropriation is required until the statutory reserve reaches 50% of the registered capital. This statutory reserve is not distributable in the form of cash dividends. Fair value reserve Group 2010 HK$000 At January 1 Transferred to profit or loss on disposal At December 31 Currency translation reserve The currency translation reserve comprises foreign exchange differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from that of the Company, as well as from the translation of foreign currency loans which form part of the Groups net investments in foreign operations. Reserve on consolidation The reserve on consolidation comprises the net excess of the fair values of the net assets over the deemed cost of business combination incurred by SRC in, and the effects arising from, the reverse acquisition of the Company in 2004. 41,307 (41,307) 2009 HK$000 41,307 41,307
22
SHARE-BASED PAYMENTS China Merchants Holdings (Pacific) Limited Share Option Scheme 2002 (the Scheme) was approved and adopted by the members of the Company at an Extraordinary General Meeting held on May 30, 2002 and modifications to the Scheme were approved by the members of the Company at Extraordinary General Meetings held on April 27, 2006 and April 25, 2008. The Scheme is administered by the Remuneration Committee, which comprises the following directors: Dr Hong Hai (Chairman) Mr Jiang Yan Fei Dr Lim Heng Kow Information regarding the Scheme is as follows: Group employees (including executive directors), non-executive directors, parent company employees and associate employees, subject to certain conditions, are eligible to participate in the Scheme. Controlling shareholders and their associates are not eligible to participate in the Scheme. the maximum discount shall not exceed 20% of the market price on the date of grant of the options. Options granted with the exercise price set at market price may be exercised 1 year after the grant date. Options granted with exercise price set at a discount to market price may only be exercised 2 years after the grant date. All options are settled by physical delivery of shares. Options granted to eligible employees (including executive directors) expire after 10 years from the grant date. Options granted to non-executive directors expire after 5 years from the grant date.
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22
SHARE-BASED PAYMENTS (contd) Details of the share options outstanding during the year are as follows: Group and Company 2010 Weighted average exercise Number of price share options S$ (000) 0.78 0.78 0.78 12,278 (1,800) 10,478 10,478
Number of share options (000) Outstanding at the beginning of the year Forfeited during the year Outstanding at the end of the year Exercisable at the end of the year 10,478 10,478 10,478
2009 Weighted average exercise price S$ 0.78 0.78 0.78 0.78
No share option was granted, exercised or expired in 2010 and 2009. Share options outstanding at the end of the year have the following expiry dates and exercise prices: No. of share options outstanding 2010 2009 (000) (000) 400 300 9,778 10,478 400 300 9,778 10,478
Date of grant of options February 10, 2003 October 6, 2006 October 6, 2006
Expiry date of options February 10, 2013 October 6, 2011 October 6, 2016
Exercise price S$ 0.500 0.789 0.789
The fair value of services received in return for share options granted are measured by reference to the fair value of share options granted. The estimate of the fair value of the services received is measured based on a Binomial model. The expected life used in the model has been adjusted, based on managements best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. Fair value of share options and assumptions Employees of Non-executive New Zealand directors subsidiaries 06/10/2006 S$0.135 S$0.800 S$0.789 30.87% 2.56 years 6.73% 2.81% 06/10/2006 S$0.172 S$0.800 S$0.789 34.37% 5.5 years 6.73% 3.00% Other employees of the Group 06/10/2006 S$0.106 S$0.800 S$0.789 25.52% 2.14 years 6.73% 2.73%
Grantees of options Date of grant of options Fair value at measurement date Share price Exercise price Expected volatility Expected option life Expected dividends Risk-free interest rate
The expected volatility is based on the historical volatility of comparable companies (calculated based on the weighted average expected life of the share options), adjusted for any expected changes to future volatility due to publicly available information. There are no market conditions associated with the share option grants. Service conditions and non-market performance conditions are not taken into account in the measurement of the fair value of the services to be received at the grant date.
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23
REVENUE Group 2010 HK$000 Sale of development properties Contract revenue Dividend income from infrastructure joint venture Interest income from: fixed deposits with banks mortgage advances loan to an infrastructure joint venture 113,115 5,163 1,801 9,037 1,176 306 130,598 2009 HK$000 195,196 9,177 5,463 16 766 210,618
24
OTHER OPERATING INCOME Group 2010 HK$000 Gain on disposal of available-for-sale investment Foreign exchange gain Others 41,314 26,554 311 68,179 2009 HK$000 13,717 10,026 23,743
25
FINANCE COSTS Group 2010 HK$000 Imputed interest on trade payables Interest on bank borrowings 757 3,688 4,445 2009 HK$000 966 3,360 4,326
The imputed interest expense on trade payables was determined based on a subsidiarys incremental borrowing rates ranging from 4.24% to 5.60% (2009: 3.99% to 7.25%) per annum. 26 SUBSIDY INCOME GROUP In accordance with the joint venture agreements of Guiliu JVs and Guihuang JVs, a subsidy is granted to the Group by the respective Sino joint venture partners of the above joint ventures for a specified period. As part of the annual cash distribution by Guiliu JVs and Guihuang JVs, the joint venture partners are entitled to receive an amount equivalent to the non-cash expenses (mainly depreciation and amortisation charges) incurred by the respective joint ventures, which were accounted for in accordance with PRC GAAP. The Groups entitlement of the above-mentioned cash distribution is determined based on its cash sharing ratio in the respective joint ventures, of which a portion calculated based on the Groups capital contribution ratio in the respective joint ventures is accounted for as loan repayment by the respective joint ventures during the year, and the remaining portion is recognised as subsidy income. The annual subsidy granted by the respective Sino joint venture partners of Guiliu JVs and Guihuang JVs is subject to availability of distributable cash and is only applicable during the following period: (a) For Guiliu JVs, the Group is entitled to receive the annual subsidy during the period from January 1, 2000 to December 31, 2009; and
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26
SUBSIDY INCOME GROUP (contd) (b) For Guihuang JVs, the Group is entitled to receive the annual subsidy during the period from January 1, 2001 to December 31, 2014.
Thereafter, the Group is not entitled to receive any subsidy from the Sino joint venture partners of the above joint ventures. 27 INCOME TAX EXPENSE Group 2010 HK$000 Current tax expense Current year Overprovision in prior year Deferred tax expense Movements of temporary differences (Over)Underprovision in prior year (Note 16) Income tax expense 128 128 14,687 (1,203) 13,484 13,612 2009 HK$000 (2,882) (63) (2,945) 10,250 492 10,742 7,797
The income tax is calculated at 17% of the estimated assessable profit for the year. The total charge for the year can be reconciled to the accounting profit as follows: Reconciliation of effective tax rate Group 2010 HK$000 Profit before tax Share of results of jointly controlled entities (net of tax) Profit before tax excluding share of results of jointly controlled entities Income tax using domestic rates applicable to profits in each country Expenses not deductible for tax purposes Income not subject to tax Withholding tax on unremitted profit of jointly controlled entities Recognition of previously unrecognised tax benefits Unrecognised deferred tax assets Effects of change in tax rate (Over)Underprovision in prior year Total income tax expense for the year 281,048 (235,599) 45,449 9,101 5,825 (15,941) 12,300 2,634 896 (1,203) 13,612 2009 HK$000 203,205 (290,129) (86,924) (579) 31,597 (17,142) 14,000 (20,571) 492 7,797
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PROFIT FOR THE YEAR Profit for the year has been arrived at after charging (crediting): Group 2010 HK$000 Cost of development properties sold Depreciation of property, plant and equipment (Note 12) Foreign exchange gain Loss on disposal of plant and equipment Non-audit fees paid and payable to auditors of the Company Operating lease expense Provision for warranties (Note 19) Staff costs* Contributions to defined contribution plans, included in staff costs Impairment loss on interests in jointly controlled entities Compensation received from sino joint venture partner for loss of profit 113,586 1,142 (26,554) 56 2,472 1,071 26,923 1,174 2009 HK$000 173,996 1,031 (13,717) 151 288 3,788 372 25,976 1,132 168,006 (9,865)
* Included in staff costs are HK$25,000 (2009:HK$127,000) of job credit received. 29 EARNINGS PER SHARE Basic earnings per share is based on: Group 2010 HK$000 Profit for the year Dividends on RCPS Profit attributable to ordinary shareholders 267,436 (6,163) 261,273 2010 No. of shares (000) Number of ordinary shares in issue at beginning of the year Effect of the conversion of RCPS Weighted average number of ordinary shares in issue during the year Diluted earnings per share is based on: Group 2010 HK$000 Profit for the year Dividends on RCPS Profit attributable to ordinary shareholders Adjustment to profit arising from full conversion of RCPS Adjusted profit attributable to ordinary shareholders 267,436 (6,163) 261,273 6,163 267,436 2009 HK$000 195,408 (11,249) 184,159 11,249 195,408 582,635 90,521 673,156 2009 HK$000 195,408 (11,249) 184,159 2009 No. of shares (000) 582,635 582,635
For the purpose of calculating the diluted earnings per ordinary share, the weighted average number of ordinary shares in issue is adjusted to take into account the dilutive effect arising from the dilutive share options and full conversion of the RCPS to ordinary shares, with the potential ordinary shares weighted for the period outstanding.
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29
EARNINGS PER SHARE (contd) The effects of the exercise of share options and conversion of the RCPS on the weighted average number of ordinary shares in issue are as follows: 2010 No. of shares (000) Weighted average number of: Ordinary shares used in the calculation of basic earnings per share Potential ordinary shares issuable under: RCPS Share options Weighted average number of ordinary shares in issue and potential ordinary shares assuming full conversion 673,156 181,041 103 854,300 2009 No. of shares (000) 582,635 271,562 29 854,226
30
SEGMENT REPORTING The Group has two reportable segments, as described below, which are the Groups strategic business units. The strategic business units are involved in two distinct business activities in two different countries. The (management team led by the Chief Executive Officer of the Group) reviews internal management reports at least on a quarterly basis. The following summary describes the operations in each of the Groups reportable segments: Toll road operations Property development : : Management of the operations of toll roads. Residential house building and land development, and provision of mortgage financing for the purchase of residential houses.
Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before income tax, as included in the internal management reports that are reviewed by the . Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of the segments relative to other entities that operate within these industries. Inter-segment pricing is determined on an arms length basis. Information about reportable segments Toll road operations HK$000 2010 External revenue Interest revenue 1,801 7,222 9,023 Interest expense Depreciation Reportable segment profit before income tax Share of profit of jointly controlled entities Reportable segment assets Interests in jointly controlled entities Capital expenditure Reportable segment liabilities (43) 300,095 235,599 741,850 2,365,543 28 4,533 Property development HK$000 118,278 1,176 119,454 (4,445) (994) (13,075) 415,539 756 110,834 Total HK$000 120,079 8,398 128,477 (4,445) (1,037) 287,020 235,599 1,157,389 2,365,543 784 115,367
74
30
SEGMENT REPORTING (contd) Information about reportable segments (contd) Toll road operations HK$000 2009 External revenue Interest revenue 9,177 3,951 13,128 Interest expense Depreciation Reportable segment profit before income tax Share of profit of jointly controlled entities Other material non-cash item: Impairment loss on interests in jointly controlled entities Reportable segment assets Interests in jointly controlled entities Capital expenditure Reportable segment liabilities (38) 213,334 290,129 Property development HK$000 195,196 1,668 196,864 (4,326) (883) 3,316 Total HK$000 204,373 5,619 209,992 (4,326) (921) 216,650 290,129
(168,006) 789,989 2,438,396 27 42,684
403,646 79 105,077
(168,006) 1,193,635 2,438,396 106 147,761
Reconciliations of reportable segment revenues, profit or loss, assets and liabilities and other material items 2010 HK$000 Revenues Total revenue for reportable segments Other revenue Elimination of inter-segment revenue Consolidated revenue Profit or loss Total profit or loss for reportable segments Unallocated amounts: Other corporate expenses Consolidated profit before income tax Assets Total assets for reportable segments Interests in jointly controlled entities Other unallocated amounts Consolidated total assets Liabilities Total liabilities for reportable segments Other unallocated amounts Consolidated total liabilities 128,477 2,121 130,598 287,020 (5,972) 281,048 1,157,389 2,365,543 570,560 4,093,492 115,367 31,970 147,337 Reportable segment totals Adjustments HK$000 HK$000 Other material items 2010 Interest revenue Interest expense Capital expenditure Depreciation 8,398 (4,445) 784 1,037 2,121 108 105 2009 HK$000 209,992 626 210,618 216,650 (13,445) 203,205 1,193,635 2,438,396 373,729 4,005,760 147,761 41,083 188,844
Total HK$000 10,519 (4,445) 892 1,142
75
30
SEGMENT REPORTING (contd) Reportable segment totals Adjustments HK$000 HK$000 Other material items 2009 Interest revenue Interest expense Capital expenditure Depreciation Impairment losses on interests in jointly controlled entities Geographical information The Group operates in three principal geographical areas PRC, Singapore and New Zealand. The Group revenue from external customers and information about its segment assets (non-current assets excluding investments in associates, finance lease receivables and other financial assets) by geographical location are detailed below: Interests in jointly controlled entities 2010 2009 HK$000 HK$000 5,619 (4,326) 106 921 168,006 626 16 110 Total HK$000 6,245 (4,326) 122 1,031 168,006
Revenue 2010 2009 HK$000 HK$000 Based on location of customer PRC New Zealand Singapore 11,000 119,454 144 130,598 31 COMMITMENTS Land purchase commitment 13,737 196,864 17 210,618
Other non-current assets 2010 2009 HK$000 HK$000 119 13,639 797 14,555
131 2,365,543 2,438,396 13,055 828 14,014 2,365,543 2,438,396
As at December 31, 2010, there is an outstanding land purchase commitment of NZ$9,337,000 (2009: NZ$10,022,000).The land purchase commitment is for land purchase with conditional terms that have not been fulfilled at the end of the reporting period. Operating lease commitments The Group and the Company lease office space and office equipment under operating leases. The lease in respect of the office space runs for an initial period of three years, with an option to renew the lease after that date. At the reporting dates, the Group and the Company had commitments for future minimum lease payments under non-cancellable operating leases as follows: Group 2010 HK$000 Payable: Within 1 year After 1 year but within 5 years 2,413 2,321 4,734 2009 HK$000 3,076 513 3,589 Company 2010 2009 HK$000 HK$000 2,082 1,664 3,746 2,540 45 2,585
76
31
COMMITMENTS (contd) Capital commitments During the year ended December 31, 2010, the Group is committed to incur, to the extent of its participation, capital expenditure in respect of the capital expenditure programme to be carried out by its jointly controlled entities of HK$108.26 million (2009: HK$36.37 million). These commitments are expected to be settled in 2011.
32
EVENTS AFTER THE REPORTING PERIOD Subsequent to the reporting date on February 28, 2011, the Board approved the additional shareholders loan of HK$80 million to China Merchants Pacific (NZ) Limited and its subsidiaries. This loan was remitted on March 9, 2011, and is interest-free, unsecured and settlement is neither planned nor likely to occur in the foreseeable future.
77
SUPPLEMENTARY INFORMATION
1 DIRECTORS REMUNERATION Companys directors receiving remuneration from the Group: Number of directors 2010 Remuneration of: S$500,000 and above S$250,000 to below S$500,000 Below S$250,000 2 4 6 2 NUMBER OF EMPLOYEES The number of employees in the Group and the Company as at 31 December 2010 were 56 (2009: 62) and 10 (2009: 10) respectively. 3 GROUP PROPERTIES (a) The Groups freehold land and building as at 31 December 2010 are as follows: Approx. site Location 246 Bush Road, Auckland, New Zealand (b) Description Land with single level office premises and 37 car parking lots area (sq.m.) 4,045 Built-up area (sq.m.) 1,048 Tenure Freehold title 2 4 6 2009
Details of the Groups development properties are as follows: As at 31 December 2010: HK$000 Particulars
(i)
Land held for development or under development
85,017
Comprising 180 undeveloped sites of average costs of HK$472,000 (NZ$78,000) with an average of 394 square metres per unit section
(ii)
Land developed
260,605
Comprising 253 developed sites of average costs of HK$1,030,000 (NZ$170,000) with an average of 394 square metres per unit section
(iii)
House construction work-in-progress
8,499
Comprising 8 houses under construction (due to be fully completed by June 2011) with an average house size of 203 square metres
(iv)
Completed houses
41,959
Comprising 24 completed houses with an average house size of 203 square metres
396,080
78
Supplementary Information
GROUP PROPERTIES (contd) As at 31 December 2009: HK$000 Particulars
(i)
Land held for development or under development
111,074
Total site area of 127,326 square metres, available for subdivision and development into 228 sections of average 558 square metres per unit section
(ii)
Land developed
217,755
Comprising 223 developed sites of average cost of HK$977,000 (NZ$173,000) with an average of 394 square metres per unit section
(iii)
House construction work-inprogress
15,478
Comprising 20 houses under construction (due to be fully completed by June 2010) with an average house size of 203 square metres
(iv)
Completed houses
26,099
Comprising 15 completed houses with an average house size of 203 square metres
370,406
79
STATISTICS OF SHAREHOLDERS
as at 17 March 2011 Number of Shares Class of Shares Voting Rights : : : 718,416,290 Ordinary Share One vote per share
There are no treasury shares held in the issued share capital of the Company. BREAKDOWN OF SHAREHOLDINGS
Size of Shareholdings 1 999 1,000 10,000 10,001 1,000,000 1,000,001 & above TOTAL
No. of Shareholders 537 4,656 729 9 5,931
% 9.06 78.50 12.29 0.15 100.00
No. of Shares 262,887 16,189,787 31,715,422 670,248,194 718,416,290
% 0.04 2.25 4.41 93.30 100.00
TWENTY LARGEST SHAREHOLDERS
NO. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.
NAME EASTON OVERSEAS LIMITED DBS NOMINEES PTE LTD UNITED OVERSEAS BANK NOMINEES PTE LTD RAFFLES NOMINEES (PTE) LTD CITIBANK NOMINEES SINGAPORE PTE LTD UOB KAY HIAN PTE LTD DBSN SERVICES PTE LTD OCBC NOMINEES SINGAPORE PTE LTD HSBC (SINGAPORE) NOMINEES PTE LTD DB NOMINEES (S) PTE LTD YAP LI JUN PHILLIP SECURITIES PTE LTD ZHOU RONGQIN CHNG BEE SUAN SINGAPORE REINSURANCE CORPORATION LTD SIF GENERAL MORGAN STANLEY ASIA (SINGAPORE) SECURITIES PTE LTD CHONG YEAN FONG YAP KAR KOI LU QING NG HOCK KON
NO. OF SHARES 592,614,000 45,212,944 9,143,500 6,621,750 4,582,000 4,180,000 3,010,000 2,692,500 2,191,500 908,000 850,000 716,250 585,000 583,000 500,000 480,000 461,000 402,000 400,000 400,000 676,533,444
% 82.49 6.29 1.27 0.92 0.64 0.58 0.42 0.37 0.31 0.13 0.12 0.10 0.08 0.08 0.07 0.07 0.06 0.06 0.06 0.06 94.18
80
Statistics of Shareholders
SUBSTANTIAL SHAREHOLDERS
Shareholdings in which Registered in the name of substantial Name Easton Overseas Limited China Merchants Group Limited Huajian Transportation Economic Development Center Cornerstone Holdings Limited
Note:
substantial shareholders are deemed to have an interest 592,614,000 592,614,000 592,614,000 Total Shareholdings 592,614,000 592,614,000 592,614,000 592,614,000 % 82.49 82.49 82.49 82.49
shareholders 592,614,000
China Merchants Group Limited, Huajian Transportation Economic Development Center and Cornerstone Holdings Limited are deemed interested in all the shares held by Easton Overseas Limited.
Free Float Based on the registers of shareholders and to the best knowledge of the Company, the percentage of shareholding held in the hands of public is approximately 17.46%. Accordingly, the Company has complied with Rule 723 of the Listing Manual of the Singapore Exchange Securities Trading Limited. Class of Shares Voting Rights Sole Shareholder of 135,781,000 RCPS : : : Redeemable Convertible Preference Shares (RCPS) No voting rights Easton Overseas Limited
81
NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the Annual General Meeting of China Merchants Holdings (Pacific) Limited (the Company) will be held at Marina Mandarin Singapore, Libra/Gemini Room, Level 1, 6 Raffles Boulevard, Marina Square, Singapore 039594 on Thursday, 28 April 2011 at 2.00 p.m. for the following purposes: AS ORDINARY BUSINESS 1. To receive and adopt the Directors Report and the Audited Accounts of the Company for the year ended 31 December 2010 together with the Auditors Report thereon. (Resolution 1) To declare a final dividend of 2.0 Singapore cents per ordinary share (tax exempt one-tier) for the year ended 31 December 2010 (previous year: 2.0 Singapore cents per ordinary share). (Resolution 2) To re-elect the following Directors of the Company retiring pursuant to Articles 98 and 103 of the Articles of Association of the Company: Mr Dong Xue Bo Mr Zheng Hai Jun Mr Wu Xin Hua (Retiring under Article 98) (Retiring under Article 103) (Retiring under Article 103) (Resolution 3) (Resolution 4) (Resolution 5)
2.
3.
Mr Dong Xue Bo will, upon re-election as a Director of the Company, remain as a member of the Audit Committee and Nominating Committee respectively and will be considered non-independent. 4. To re-appoint Dr Lim Heng Kow, a Director of the Company retiring under Section 153(6) of the Companies Act, Cap. 50, to hold office from the date of this Annual General Meeting until the next Annual General Meeting of the Company. (Resolution 6) [See Explanatory Note (i)] Dr Lim Heng Kow will, upon re-appointment as a Director of the Company, remain as Chairman of the Audit Committee and Nominating Committee respectively and a member of the Remuneration Committee and will be considered independent. 5. To approve the payment of Directors fees of S$115,000 for the year ended 31 December 2010 (previous year: S$105,000). (Resolution 7) To re-appoint Messrs Deloitte & Touche LLP as the Auditors of the Company and to authorise the Directors of the Company to fix their remuneration. (Resolution 8) To transact any other ordinary business which may properly be transacted at an Annual General Meeting.
6.
7.
82
Notice of Annual General Meeting
AS SPECIAL BUSINESS To consider and if thought fit, to pass the following resolutions as Ordinary Resolutions, with or without any modifications: 8. Authority to issue shares That pursuant to Section 161 of the Companies Act, Cap. 50 and Rule 806 of the Listing Manual of the Singapore Exchange Securities Trading Limited (SGX-ST), the Directors of the Company be authorised and empowered to: (a) (i) issue shares in the Company (shares) whether by way of rights, bonus or otherwise; and/ or make or grant offers, agreements or options (collectively, Instruments) that might or would require shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) options, warrants, debentures or other instruments convertible into shares,
(ii)
at any time and upon such terms and conditions and for such purposes and to such persons as the Directors of the Company may in their absolute discretion deem fit; and (b) (notwithstanding the authority conferred by this Resolution may have ceased to be in force) issue shares in pursuance of any Instruments made or granted by the Directors of the Company while this Resolution was in force,
provided that: (1) the aggregate number of shares (including shares to be issued in pursuance of the Instruments, made or granted pursuant to this Resolution) to be issued pursuant to this Resolution shall not exceed fifty per centum (50%) of the total number of issued shares in the capital of the Company (as calculated in accordance with sub-paragraph (2) below), of which the aggregate number of shares to be issued other than on a pro-rata basis to shareholders of the Company shall not exceed twenty per centum (20%) of the total number of issued shares in the capital of the Company (as calculated in accordance with sub-paragraph (2) below); (subject to such calculation as may be prescribed by the SGX-ST) for the purpose of determining the aggregate number of shares that may be issued under sub-paragraph (1) above, the total number of issued shares shall be based on the total number of issued shares in the capital of the Company at the time of the passing of this Resolution, after adjusting for: (a) (b) new shares arising from the conversion or exercise of any convertible securities; new shares arising from exercising share options or vesting of share awards which are outstanding or subsisting at the time of the passing of this Resolution; and any subsequent bonus issue, consolidation or subdivision of shares;
(2)
(c) (3)
in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the Listing Manual of the SGX-ST for the time being in force (unless such compliance has been waived by the SGX-ST) and the Articles of Association of the Company; and
unless revoked or varied by the Company in a general meeting, such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier. (Resolution 9) [See Explanatory Note (ii)]
(4)
83
9.
Authority to issue shares under the CMHP Share Option Scheme 2002 That pursuant to Section 161 of the Companies Act, Cap. 50, the Directors of the Company be authorised and empowered to offer and grant options under the CMHP Share Option Scheme 2002 (the Scheme) and to issue from time to time such number of shares in the capital of the Company as may be required to be issued pursuant to the exercise of options granted by the Company under the Scheme, whether granted during the subsistence of this authority or otherwise, provided always that the aggregate number of additional ordinary shares to be issued pursuant to the Scheme shall not exceed fifteen per centum (15%) of the total number of issued shares in the capital of the Company from time to time and that such authority shall, unless revoked or varied by the Company in a general meeting, continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier. (Resolution 10) [See Explanatory Note (iii)]
By Order of the Board Lim Lay Hoon Lai Foon Kuen Company Secretaries Singapore, 11 April 2011 Explanatory Notes: (i) The effect of the Ordinary Resolution 6 proposed in item 4 above, is to re-appoint a Director of the Company who is over 70 years of age. The Ordinary Resolution 9 in item 8 above, if passed, will empower the Directors of the Company, effective until the conclusion of the next Annual General Meeting of the Company, or the date by which the next Annual General Meeting of the Company is required by law to be held or such authority is varied or revoked by the Company in a general meeting, whichever is the earlier, to issue shares, make or grant Instruments convertible into shares and to issue shares pursuant to such Instruments, up to a number not exceeding, in total, 50% of the total number of issued shares in the capital of the Company, of which up to 20% may be issued other than on a pro-rata basis to shareholders. For determining the aggregate number of shares that may be issued, the total number of issued shares will be calculated based on the total number of issued shares in the capital of the Company at the time this Ordinary Resolution is passed after adjusting for new shares arising from the conversion or exercise of any convertible securities or share options or vesting of share awards which are outstanding or subsisting at the time when this Ordinary Resolution is passed and any subsequent bonus issue, consolidation or subdivision of shares. (iii) The Ordinary Resolution 10 in item 9 above, if passed, will empower the Directors of the Company, effective until the conclusion of the next Annual General Meeting of the Company, or the date by which the next Annual General Meeting of the Company is required by law to be held or such authority is varied or revoked by the Company in a general meeting, whichever is the earlier, to issue shares in the Company pursuant to the exercise of options granted or to be granted under the Scheme up to a number not exceeding in aggregate (for the entire duration of the Scheme) fifteen per centum (15%) of the total number of issued shares in the capital of the Company from time to time.
(ii)
Notes: 1. A Member entitled to attend and vote at the Annual General Meeting (the Meeting) is entitled to appoint not more than two proxies to attend and vote in his/her stead. A proxy need not be a Member of the Company. The instrument appointing a proxy must be deposited at the Registered Office of the Company at 50 Raffles Place #32-01, Singapore Land Tower, Singapore 048623 not less than forty-eight (48) hours before the time appointed for holding the Meeting.
2.
84
CHINA MERCHANTS HOLDINGS (PACIFIC) LIMITED

[Company Registration No. 198101278D] (Incorporated In The Republic of Singapore)
IMPORTANT:
1. For investors who have used their CPF monies to buy China Merchants Holdings (Pacific) Limiteds shares, this Report is forwarded to them at the request of the CPF Approved Nominees and is sent solely FOR INFORMATION ONLY. This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them. CPF investors who wish to attend the Meeting as an observer must submit their requests through their CPF Approved Nominees within the time frame specified. If they also wish to vote, they must submit their voting instructions to the CPF Approved Nominees within the time frame specified to enable them to vote on their behalf.
2.
3.
PROXY FORM
(Please see notes overleaf before completing this Form)
I/We, of being a member/members of China Merchants Holdings (Pacific) Limited (the Company), hereby appoint: Name NRIC/Passport No. Proportion of Shareholdings No. of Shares Address and/or (delete as appropriate) Name NRIC/Passport No. Proportion of Shareholdings No. of Shares Address or failing the person, or either or both of the persons, referred to above, the Chairman of the Meeting as my/our proxy/proxies to vote for me/us on my/our behalf at the Annual General Meeting (the Meeting) of the Company to be held on 28 April 2011 at 2.00 p.m. and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the Resolutions proposed at the Meeting as indicated hereunder. If no specific direction as to voting is given or in the event of any other matter arising at the Meeting and at any adjournment thereof, the proxy/proxies will vote or abstain from voting at his/her discretion. The authority herein includes the right to demand or to join in demanding a poll and to vote on a poll. (Please indicate your vote For or Against with a tick [] within the box provided.) % %
No. 1 2 3 4 5 6 7 8 9 10
Resolutions relating to: Directors Report and Audited Accounts for the year ended 31 December 2010 Payment of proposed final dividend Re-election of Mr Dong Xue Bo as a Director Re-election of Mr Zheng Hai Jun as a Director Re-election of Mr Wu Xin Hua as a Director Re-appointment of Dr Lim Heng Kow as a Director Approval of Directors fees amounting to S$115,000 Re-Appointment of Messrs Deloitte & Touche LLP as Auditors Authority to issue new shares Authority to issue shares under the CMHP Share Option Scheme 2002 day of 2011
For
Against
Dated this
Total number of Shares in: (a) CDP Register (b) Register of Members Signature of Shareholder(s) Or, Common Seal of Corporate Shareholder
No. of Shares
Notes: 1. Please insert the total number of Shares held by you. If you have Shares entered against your name in the Depository Register (as defined in Section 130A of the Companies Act, Chapter 50 of Singapore), you should insert that number of Shares. If you have Shares registered in your name in the Register of Members, you should insert that number of Shares. If you have Shares entered against your name in the Depository Register and Shares registered in your name in the Register of Members, you should insert the aggregate number of Shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the Shares held by you. A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint not more than two proxies to attend and vote in his/her stead. A proxy need not be a member of the Company. Where a member appoints two proxies, the appointment shall be treated as an alternative to the first named unless he/she specifies the proportion of his/her shareholding (expressed as a percentage of the whole) to be represented by each such proxy. Completion and return of this instrument appointing a proxy shall not preclude a member from attending and voting at the Meeting. Any appointment of a proxy or proxies shall be deemed to be revoked if a member attends the meeting in person, and in such event, the Company reserves the right to refuse to admit any person or persons appointed under the instrument of proxy to the Meeting. The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at 50 Raffles Place #32-01, Singapore Land Tower, Singapore 048623 not less than 48 hours before the time appointed for the Meeting. The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of an officer or attorney duly authorised. Where the instrument appointing a proxy or proxies is executed by an attorney on behalf of the appointor, the letter or power of attorney or a duly certified copy thereof must be lodged with the instrument. A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks fit to act as its representative at the Meeting, in accordance with Section 179 of the Companies Act, Chapter 50 of Singapore.
2.
3.
4.
5.
6.
7.
General: The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible, or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of Shares entered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the member, being the appointor, is not shown to have Shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding the Meeting, as certified by The Central Depository (Pte) Limited to the Company.

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COMMITMENT

China Merchants Holdings (Pacific) Limited

The corporate structure of the Group is as follows:

40% (Guangxi Zhuang Autonomous Region,

Toll Road Business

60% (Zhejiang Province, PRC)

CHINA MERCHANTS HOLDINGS (PACIFIC) LIMITED

60% (Guizhou Province, PRC)

100% (Auckland, New Zealand)

100% (New Zealand & PRC)

ANNUAL REPORT 2010 CHINA MERCHANTS HOLDINGS (PACIFIC) LIMITED

CHINA MERCHANTS HOLDINGS (PACIFIC) LIMITED ANNUAL REPORT 2010

The Road Ahead

We are optimistic about the toll road industry in China. The

CHINA MERCHANTS HOLDINGS (PACIFIC) LIMITED ANNUAL REPORT 2010

A s the Group enters its next phase of growth, we will

in Luomei Highway in January 2010, realising a gain of approximately HK$41.3 million.

ANNUAL REPORT 2010 CHINA MERCHANTS HOLDINGS (PACIFIC) LIMITED

88,349 125,468 21,782 235,599

88,349 141,640 21,782 251,771

153,655 120,864 15,610 290,129

53,417 14,484 67,901

207,072 135,348 15,610 358,030

(57.3) 4.6 39.5 (29.7)

Infrastructure Joint Venture Luomei Highway Other Income/ (Expenses)

1,801 5,209 258,781 41,314 300,095

9,177 14,133 381,340 (168,006) 213,334

n.m. n.m. (32.1) n.m. 40.7

Non-recurring Items Total

CHINA MERCHANTS HOLDINGS (PACIFIC) LIMITED ANNUAL REPORT 2010

Guiliu Expressway Trafc Volume (000 Vehicles)

Y07 Y08 Y09

2010 Vehicles (000)

2009 Vehicles (000)

Guiliu Expressway Toll Revenue (RMB 000)

2010 RMB (000)

2009 RMB (000)

ANNUAL REPORT 2010 CHINA MERCHANTS HOLDINGS (PACIFIC) LIMITED

CEOS MESSAGE (CONTD)

Guihuang Highway Trafc Volume (000 Vehicles)

Yuyao Highway Trafc Volume (000 Vehicles)

Guihuang Highway Toll Revenue (RMB 000)

Yuyao Highway Toll Revenue (RMB000)

CHINA MERCHANTS HOLDINGS (PACIFIC) LIMITED ANNUAL REPORT 2010

Property Development and Other Businesses

ANNUAL REPORT 2010 CHINA MERCHANTS HOLDINGS (PACIFIC) LIMITED

CEOS MESSAGE (CONTD)

CHINA MERCHANTS HOLDINGS (PACIFIC) LIMITED ANNUAL REPORT 2010

Mr Zheng Hai Jun Vice Chairman

Mr Jiang Yan Fei Vice Chairman & Chief Executive Ofcer

ANNUAL REPORT 2010 CHINA MERCHANTS HOLDINGS (PACIFIC) LIMITED

Mr Wu Xin Hua Executive Director & Chief Operating Ofcer

Dr Lim Heng Kow Independent Director

Dr Hong Hai Independent Director

CHINA MERCHANTS HOLDINGS (PACIFIC) LIMITED ANNUAL REPORT 2010

KEY EXECUTIVE OFFICERS

Mr Chen Yuan Jun

Ms Lim Lay Hoon

ANNUAL REPORT 2010 CHINA MERCHANTS HOLDINGS (PACIFIC) LIMITED

Mr Graham Basil Street

Mr Yang Guo Lin

CHINA MERCHANTS HOLDINGS (PACIFIC) LIMITED ANNUAL REPORT 2010

ANNUAL REPORT 2010 CHINA MERCHANTS HOLDINGS (PACIFIC) LIMITED