2014 Interim Report

Deepen Reform and Innovation Achieve Steady Growth In the first half of 2014, China's economic growth has been leveling off. Benefiting from the gradual recovery of Zhejiang Province's economy and an improved environment for foreign trade, the Group's total income increased by 12.9% compared with the corresponding period of last year to Rmb4,244.23 million. Traffic volumes for the Group's three expressways, namely Shanghai-Hangzhou-Ningbo Expressway, Shangsan Expressway and Jinhua Section of Ningbo-Jinhua Expressway increased 7.0%, 6.7% and 11.7% respectively, in line with the economic growth of the regions in which they are located. Additionally, while accelerating the comprehensive development of each business segment, Zheshang Securities has been actively working to improve its income and profit structure to gradually reduce the dominant role that its brokerage business played in the past. In the future, for the toll road business, the Group will make efforts to further increase income from its main businesses through various measures, including reducing costs, increasing operational efficiency, and improving facilities management and service quality. Meanwhile, the Group will continue to strengthen its securities businesses. Also, the Group will look for suitable investment projects while nurturing management capabilities in its diversified operations. By taking advantage of its financial resources, the Group will create strategic synergies with its parent company in order to broaden its future development, improve profitability, and achieve sustainable development over the long term. Contents 2014 Interim Results Business Review Financial Analysis Outlook Disclosure of Interests and Other Matters Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income Condensed Consolidated Statement of Financial Position Condensed Consolidated Statement of Changes in Equity Condensed Consolidated Statement of Cash Flows Notes to Condensed Consolidated Financial Statements 2014 Environmental and Social Responsibility Report Appendices Corporate Information Corporate Structure of the Group Financial Highlights Location Map of Expressways in Zhejiang Province 2014 Interim Results The directors (the "Directors") of Zhejiang Expressway Co., Ltd. (the "Company") announce the unaudited consolidated operating results of the Company and its subsidiaries (collectively the "Group") for the six months ended June 30, 2014 (the "Period"), with the basis of preparation as stated in note 1 to the condensed consolidated financial statements set out below. During the Period, revenue for the Group was Rmb4,121.82 million, representing an increase of 13.0% over the same period in 2013. Profit for the Period attributable to owners of the Company was Rmb1,063.43 million, representing an increase of 14.3% year-on-year. Earnings per share for the Period was Rmb24.49 cents (same period in 2013: Rmb21.42 cents). The Directors have recommended to pay an interim dividend of Rmb6 cents per share, subject to shareholders' approval at the extraordinary general meeting of the Company expected to be held on October 16, 2014. The interim report has not been audited or reviewed by the auditors but has been reviewed by the audit committee of the Company. Business Review As the government's macro economic control policies that are aimed at sustaining stable growth and the implementation of deep level structural reforms gradually took effect, the growth of the nation's economy has been stabilizing. China recorded 7.4% GDP growth in the first half of 2014 compared with the corresponding period of last year. During the first half of 2014, though Zhejiang Province saw varied levels of growth in investment, consumption and exports, the growth rate of Zhejiang Province's economy was slower than the corresponding period of last year. During the Period, the GDP of Zhejiang Province increased 7.2% compared with the corresponding period of last year. Benefiting from the gradual recovery of Zhejiang Province's economy and an improved environment for foreign trade, the Group's total income increased by 12.9% compared with the corresponding period of last year to Rmb4,244.23 million. Income generated from the three major expressways operated by the Group was Rmb2,111.52 million, representing an increase of 6.3% over the corresponding period of 2013 and 49.8% of total income. Income from the Group's toll road-related businesses was Rmb1,208.56 million, representing an increase of 18.9% over the corresponding period of 2013 and 28.5% of total income. The Group's securities business contributed income of Rmb924.15 million, representing an increase of 22.3% over the corresponding period of 2013 and 21.7% of total income. A breakdown of the Group's income for the Period is set out below: For the six months ended June 30, 2014 2013 Rmb'000 Rmb'000 % Change Toll income Shanghai-Hangzhou-Ningbo Expressway 1,495,972 1,502,446 -0.4% Shangshan Expressway 470,822 359,199 31.1% Jinhua section, Ningbo-Jinhua Expressway 144,724 125,490 15.3% Other income Service areas 1,138,682 962,830 18.3% Advertising 50,027 53,815 -7.0% Road maintenance 19,852 - N/A Securities business income Commission 641,797 579,077 10.8% Interest income 282,349 176,800 59.7% Subtotal 4,244,225 3,759,657 12.9% Less: Revenue taxes (122,403) (112,389) 8.9% Revenue 4,121,822 3,647,268 13.0% Toll Road Operations The organic growth in toll road traffic volume is closely associated with the regional economy along the toll roads. During the Period, the traffic volume on the Group's three expressways experienced varying levels of organic growth corresponding to the regions in which they are located. Organic traffic volume growth rates for the Shanghai-Hangzhou-Ningbo Expressway, Shangsan Expressway and Jinhua Section of Ningbo-Jinhua Expressway were 7.0%, 6.7% and 11.7%, respectively, of which the growth rate was slightly lower than the corresponding period of last year for the Shanghai-Hangzhou-Ningbo Expressway, at about equal level for the Shangsan Expressway, and at a slightly higher level for the Jinhua Section of Ningbo-Jinhua Expressway. Since the opening of Jiaxing-Shaoxing Bridge (not operated by the Group) in July, 2013, a certain level of traffic diversion has taken place for the Group's Shanghai-Hangzhou-Ningbo Expressway and resulted in a decrease of Rmb75.00 million in terms of the Group's toll income during the Period. However, the Jiaxing-Shaoxing Bridge has a more positive effect on the Shangsan Expressway. Most of the vehicles passing through Jiangsu Province, Taizhou and Wenzhou took the Shangsan Expressway, while a number of vehicles traveling between Shanghai, Taizhou and Wenzhou and between Jiangsu and Ningbo also chose to take the Shangsan Expressway or Hangzhou-Ningbo Section of the Shanghai-Hangzhou-Ningbo Expressway as a result of the Company's effective promotions to attract more traffic. During the Period, the opening of the Jiaxing-Shaoxing Bridge led to an increase of Rmb86.00 million in terms of toll income on the Shangsan Expressway. The Jinhua Section of the Ningbo-Jinhua Expressway maintained a relatively high organic growth in traffic volume as a result of continuing high speed economic development in Yiwu and nearby regions, as well as a speedy increase in small truck ownership in Yiwu. Construction work on roads surrounding the Ningbo-Jinhua Expressway and the Company's effective promotions efforts also had a positive impact on toll income. Container trucks traveling along the Ningbo-Jinhua Expressway also posted a notable increase in miles driven. During the Period, the Jinhua Section of the Ningbo-Jinhua Expressway recorded an increase of approximately Rmb5.00 million in toll income as a result of factors such as construction work on surrounding roads. Meanwhile, toll income from the Shanghai-Hangzhou-Ningbo Expressway decreased by approximately Rmb18.00 million as a result of construction on the Hangzhou Airport road that began on April 15, 2014. Moreover, the opening of the Qianjiang Road (not operated by the Group) on April 16, 2014, also led to a decline in toll income of the Shanghai-Hangzhou-Ningbo Expressway by approximately Rmb2.70 million. The average daily traffic volume in full-trip equivalents along the Group's Shanghai-Hangzhou-Ningbo Expressway was 43,764 during the Period, representing an increase of 1.2% year-on-year. In particular, average daily traffic volume in full-trip equivalents along the Shanghai-Hangzhou Section of the Shanghai-Hangzhou-Ningbo Expressway was 42,211, representing a decrease of 3.3% year-on-year. The average daily traffic volume in full-trip equivalents along the Hangzhou-Ningbo Section was 44,873, representing an increase of 4.3% year-on-year. The average daily traffic volume in full-trip equivalents along the Shangsan Expressway was 22,435 during the Period, representing an increase of 29.0% year-on-year. The average daily traffic volume in full-trip equivalents along the Jinhua Section of the Ningbo-Jinhua Expressway was 15,162 during the Period, representing an increase of 17.3% year-on-year. Total toll income from the 248 km Shanghai-Hangzhou-Ningbo Expressway, the 142 km Shangsan Expressway and the 70 km Jinhua Section of the Ningbo-Jinhua Expressway amounted to Rmb2,111.52 million during the Period, representing an increase of 6.3% year-on-year. Toll income from the Shanghai-Hangzhou-Ningbo Expressway was Rmb1,495.97 million, representing a decrease of 0.4% year-on-year; toll income from the Shangsan Expressway was Rmb470.82 million, representing an increase of 31.1% year-on-year; while toll income from the Jinhua Section of the Ningbo-Jinhua Expressway was Rmb144.73 million, representing an increase of 15.3% year-on-year. Toll Road-Related Business Operations The Company also operates certain toll road-related businesses along its expressways through its subsidiaries and associated companies, including gas stations, restaurants, shops in service areas, advertising at service areas, toll plazas and expressway interchanges, as well as road maintenance. During the Period, with the opening of the Jiaxing-Shaoxing Bridge, the service areas along Shangsan Expressway saw significant growth in income due to the increase in traffic volume. However, the decrease in traffic volume on the Shanghai-Hangzhou-Ningbo Expressway adversely affected income from service areas along the expressway, and these service areas make a relatively large contribution to income from service areas. Therefore, the overall income from service areas declined. However, due to a solid increase in sales of refined oil products and additional income from the external road maintenance projects, the Group's toll road-related businesses achieved a solid increase in overall income. Income from toll road-related businesses was Rmb1,208.56 million for the Period, representing an increase of 18.9% year-on-year. Securities Business During the Period, although the Shanghai and Shenzhen stock indices declined slightly, the aggregate trading volume increased by 4.7% compared with the corresponding period of last year. Despite the slight growth in market share and trading volume of Zheshang Securities Co., Ltd. ("Zheshang Securities", a 70.83% owned subsidiary of Zhejiang Shangsan Expressway Co., Ltd. which is a subsidiary of the Company), its average commission rate declined from 0.08% to 0.072% due to intensified competition in the securities industry and the gradual relaxation of controls on commissions. As a result, income from Zheshang Securities' brokerage business was generally flattish compared with the same period last year. Additionally, while accelerating the comprehensive development of each business segment, Zheshang Securities has been actively working to improve its income and profit structure to gradually reduce the dominant role that its brokerage business played in the past. During the Period, income from investment banking, margin financing and securities lending, as well as asset management businesses of Zheshang Securities all grew steadily year-on- year. The IPO application submitted by Zheshang Securities was accepted by the China Securities Regulatory Commission in May 2013. Zheshang Securities remains on the waiting list for an IPO. During the Period, Zheshang Securities' total operating income was Rmb924.15 million, an increase of 22.3% year-on-year. Brokerage commission income was Rmb641.80 million, a year-on-year increase of 10.8%. Interest income from the securities business was Rmb282.35 million, a year-on-year increase of 59.7%. Moreover, securities investment gains from Zheshang Securities included in the condensed consolidated statement of profit or loss and other comprehensive income of the Group was Rmb79.15 million during the Period. Long-Term Investments Zhejiang Expressway Petroleum Development Co., Ltd. (a 50% owned associate company of the Company) recorded income of Rmb3,265.30 million, a year-on-year increase of 5.8%. The increase was primarily attributable to an increase in sales volume of refined oil products. During the Period, net profit realized was Rmb11.36 million (corresponding period of 2013: net profit of Rmb11.34 million). Shengxin Expressway Co., Ltd. ("Shengxin Company", a 50% owned joint venture of the Company) operates the 73.4km Shaoxing Section of the Ningbo-Jinhua Expressway. During the Period, the traffic volume of the Shaoxing Section of the Ningbo-Jinhua Expressway increased as the economy of Zhejiang Province grew steadily. The average daily traffic volume in full-trip equivalents was 13,661, an increase of 10.9% year-on-year. Toll income during the Period was Rmb152.92 million. However, due to an increase in road maintenance costs and its relatively heavy financial burden, the joint venture reported a loss of Rmb31.20 million (corresponding period of 2013: loss of Rmb27.88 million). JoinHands Technology Co., Ltd. is a 27.582% owned associate company of the Company. The Company instituted legal proceedings with regards to the transfer of the equity interest in this associate company and then lodged an appeal against the subsequent judgment. The appeal was ruled in favor of the Company by the Hangzhou Intermediate People's Court on April 28, 2013 regarding the Company's priority of compensation for the mortgaged properties. These mortgaged properties were auctioned off by the court and the Company has received proceeds of Rmb23.83 million as consideration for its equity interest transfer on May 16, 2014. From then on, JoinHands Technology Co., Ltd. is no longer an associate of the Company. Zhejiang Communications Investment Group Finance Co., Ltd. (a 35% owned associate company of the Company) derives income mainly from fees and commissions for providing financial services, including arranging loans to, and receiving deposits from subsidiaries of Zhejiang Communications Investment Group Co., Ltd. (the controlling shareholder of the Company). Profit from Zhejiang Communications Investment Group Finance Co., Ltd. was accounted for as gain of associates of the Company starting from May 1, 2013 and realized a net profit of Rmb66.89 million during the Period. Human Resources During the Period, the Company actively revamped its human resource management, improved its remuneration and performance policy, and promoted the pegging of overall remuneration increase with the productivity of employees, thereby paving the way for increasing employees' remuneration. There was no significant change in other staff matters and assignment compared with the details disclosed in the Company's most recent annual report. Financial Analysis The Group adopts a prudent financial policy with an aim to provide shareholders of the Company with sound returns over the long term. During the Period, profit attributable to owners of the Company was approximately Rmb1,063.43 million, representing an increase of 14.3% year-on-year, return on owners' equity was 6.7%, representing an increase of 9.8% year-on-year, while earnings per share for the Company was Rmb24.49 cents. Liquidity and financial resources As at June 30, 2014, current assets of the Group amounted to Rmb19,874.86 million in aggregate (December 31, 2013: Rmb16,652.84 million), of which bank balances and cash accounted for 12.6% (December 31, 2013: 15.1%), bank balances held on behalf of customers accounted for 48.9% (December 31, 2013: 49.4%), and held for trading investments accounted for 9.0% (December 31, 2013: 7.1%). Current ratio (current assets over current liabilities) of the Group as at June 30, 2014 was 1.4 (December 31, 2013: 1.4). Excluding the effect of the customer deposits arising from the securities business, the resultant current ratio of the Group (current assets less bank balances held on behalf of customers over current liabilities less balance of accounts payable to customers arising from securities business) was 2.1 (December 31, 2013: 2.2). As at As at June 30, December 31, 2014 2013 Rmb'000 Rmb'000 Cash and cash equivalents Rmb 1,739,561 1,773,310 US$ in Rmb equivalent 28,301 28,209 HK$ in Rmb equivalent 5,458 5,462 Time deposit - Rmb 726,245 704,459 Held for trading investments - Rmb 1,785,239 1,181,025 Available-for-sale investments - Rmb 512,789 281,924 Total 4,797,593 3,974,389 Rmb 4,763,834 3,940,718 US$ in Rmb equivalent 28,301 28,209 HK$ in Rmb equivalent 5,458 5,462 The amount of held for trading investments of the Group as at June 30, 2014 was Rmb1,785.24 million (December 31, 2013: Rmb1,181.03 million), of which 93.4% was invested in bonds, 6.2% was invested in stocks, and the rest was invested in open-end equity funds. During the Period, net cash inflow generated from the Group's operating activities amounted to Rmb1,401.75 million. The Directors do not expect the Company to experience any problems with liquidity and financial resources in the foreseeable future. Borrowings and solvency As at June 30, 2014, total liabilities of the Group amounted to Rmb14,823.48 million (December 31, 2013: Rmb12,420.24 million), of which 4.7% was bank and other borrowings, 6.7% was short-term loan note and 65.3% was accounts payable to customers arising from securities business. As at June 30, 2014, total interest-bearing borrowings of the Group amounted to Rmb1,700.00 million, representing a decrease of 7.6% compared to that as at December 31, 2013. The borrowings comprised outstanding balances of domestic commercial bank loans of Rmb300.00 million, loans from a domestic non-bank financial institution of Rmb400.00 million and short-term loan note with three-month maturity of Rmb1.00 billion. Of the interest-bearing borrowings, 11.8% was not payable within one year. Maturity Profile of Interest-bearing Borrowings ----------------------------------------------- More 1 year- 5 year Beyond Gross total Within 1 year inclusive 5 year Rmb'000 Rmb'000 Rmb'000 Rmb'000 Floating rates Domestic commercial bank loans 300,000 100,000 200,000 - Fixed rates Loans from a domestic non-bank financial institution 400,000 400,000 - - Short-term loan note 1,000,000 1,000,000 - - Total as at June 30, 2014 1,700,000 1,500,000 200,000 - Total as at December 31, 2013 1,840,000 1,540,000 300,000 - As at June 30, 2014, all of the Group's loans from domestic commercial banks were long-term loans, of which long-term loans due in one year amounted to Rmb100.00 million, with floating interest rate ranging from 5.895% to 6.765% per annum. Loans from a domestic non-bank financial institution were short-term loans, with the interest rate fixed at 5.04% per annum. The annual coupon rate for the latest short-term loan note was fixed at 4.87%, while the annual interest rate for accounts payable to customers arising from the securities business was fixed at 0.35%. Total interest expenses for the Period amounted to Rmb43.27 million, while profit before interest and tax amounted to Rmb1,717.91 million. The interest cover ratio (profit before interest and tax over interest expenses) stood at 39.7 (corresponding period of 2013: 34.4) times. As at June 30, 2014, the asset-liability ratio (total liabilities over total assets) of the Group was 42.9% (December 31, 2013: 38.7%). Excluding the effect of customer deposits arising from the securities business, the resultant asset-liability ratio (total liabilities less balance of accounts payable to customers arising from securities business over total assets less bank balances held on behalf of customers) of the Group was 20.7% (December 31, 2013: 17.8%). Capital structure As at June 30, 2014, the Group had Rmb19,741.37 million in total equity, Rmb12,276.94 million in fixed- rate liabilities, Rmb300.00 million in floating-rate liabilities, and Rmb2,246.54 million in interest-free liabilities, representing 57.1%, 35.5%, 0.9% and 6.5% of the Group's total capital, respectively. The gearing ratio, which is computed by dividing the total liabilities less accounts payable to customers arising from the securities business by total equity, was 26.0% as at June 30, 2014 (December 31, 2013: 21.6%). Capital expenditure commitments and utilization During the Period, capital expenditure of the Group totaled Rmb193.55 million, while capital expenditure of the Company totaled Rmb41.87 million. Amongst the total capital expenditure of the Group, Rmb57.50 million was incurred for setting up a wholly-owned subsidiary of the Company and external equity acquisition by Zheshang Securities, Rmb114.29 million was incurred for acquisition and construction of properties, Rmb20.15 million was incurred for purchase and construction of equipments and facilities, and Rmb1.61 million was incurred for service area renovation and expansion. As at June 30, 2014, the remaining capital expenditure committed by the Group and the Company totaled Rmb1,550.97 million and Rmb270.00 million, respectively. Amongst the remaining balance of total capital expenditures committed by the Group, Rmb1,209.80 million will be used for acquisition and construction of properties, Rmb324.78 million for acquisition and construction of equipments and facilities, Rmb16.39 million for service area renovation and expansion. The Group will finance the above-mentioned capital expenditure commitments with internally generated cash flow first and then will consider using debt financing to meet any shortfalls in priority to using other methods. Contingent liabilities and pledge of assets Pursuant to the board resolution of the Company dated November 16, 2012, the Company and Shaoxing Communications Investment Group Co., Ltd. (the other joint venture partner that holds 50% equity interest in Shengxin Co) provided Shengxin Co with a joint guarantee for its bank loans of Rmb2,200.00 million, in accordance with their proportionate equity interest in Shengxin Co. During the Period, Rmb25.00 million of the bank loans had been repaid. Pursuant to the resolution of shareholders' meeting dated June 26, 2012 of Zhejiang Yuhang Expressway Co., Ltd. ("Yuhang Co", a 51% owned subsidiary of the Company), Yuhang Co provided a property under construction as a mortgaged asset for its domestic commercial bank loan of Rmb100.00 million. As at June 30, 2014, the carrying amount of the mortgaged asset was Rmb525.40 million. Pursuant to the board resolution dated June 24, 2008 of Zhejiang Jinhua Yongjin Expressway Co., Ltd. ("Jinhua Co", a 100% owned subsidiary of the Company), Jinhua Co provided the operating right of the expressway operated by it as pledged asset for its domestic commercial bank loans, the remaining outstanding balance of which was Rmb200.00 million. As at June 30, 2014, the carrying amount of the pledged asset was Rmb1,829.78 million. Except for the above, as at June 30, 2014, the Group did not have any other contingent liabilities, pledge of assets or guarantees. Foreign exchange exposure Save for dividend payments to the holders of H shares in Hong Kong dollars, the Group's principal operations were transacted and booked in Renminbi. Therefore, the Group's exposure to exchange fluctuation is limited. During the Period, the Group has not used any financial instruments for hedging purpose. Although the Directors do not foresee any material foreign exchange risks for the Group, there is no assurance that foreign exchange risks will not affect the operating results of the Group in the future. Outlook Though the economy is still facing downward pressure, a series of "stabilizing growth" policies implemented by the state are gradually yielding results. While external demands are expected to improve somewhat, internal growth of economic development is expected to strengthen. Therefore, we expect that the organic growth in traffic volume of the Group's expressways will maintain a steady rate in the second half of this year. Qianjiang Road, which opened for traffic in the first half of this year, and the construction works on the airport road near the Second Qianjiang Bridge, are still expected to have an adverse impact on the Group's Shanghai- Hangzhou-Ningbo Expressway. Therefore, the Group will closely monitor the construction work on the airport road, analyze impact from the newly opened road network of the Qianjiang Road and the Jiaxing-Shaoxing Bridge, and undertake effective promotional efforts to attract more vehicles to the expressways operated by the Group so as to reduce the negative impact of traffic diversion. Meanwhile, Zhejiang Provincial Government recently launched a specific rectification action on billboard advertising along expressways in the province. The billboards on the two sides of the main lines of the expressways must be removed by the end of October this year, which will restrict the advertising business carried out by Zhejiang Expressway Investment Development Co., Ltd. (a 100% owned subsidiary of the Company) to service areas, toll plazas and expressway interchanges. Additionally, Zheshang Securities transferred its entire 25% equity interest in Zheshang Fund Management Co., Ltd. to Tonglian Capital Management Co., Ltd. through electronic online bidding on the Zhejiang Property and Stock Exchange on August 14, 2014. The total consideration received for such transfer was Rmb207.00 million, and is expected to have a positive effect on the Group's results for the second half of 2014. A series of policies carried out by the Chinese government to reform China's stock markets, which include the establishment of the Shanghai-Hong Kong Stock Connect, the anticipated recovery of the Chinese stock market and increased liquidity in China are expected to present new challenges and opportunities for Zheshang Securities. Zheshang Securities will accelerate the development of innovative businesses and further push forward the A-share listing process while strengthening cost and risk control to facilitate the sustainable development of its businesses. The Group's management is making efforts to further strengthen its core businesses through various measures, including reducing costs, increasing operational efficiency, improving operating management facilities, and further enhance service quality. In addition to continuing to strengthen its securities businesses, the Group will look for suitable investment projects while nurturing management capabilities in diversified operations. By leveraging its financial resources, the Group will develop strategic synergies with its parent company in order to broaden its scope of future development, improve profitability, and achieve sustainable development over the long term. Disclosure of Interests and Other Matters Purchase, Sale and Redemption of the Company's Shares Neither the Company nor any of its subsidiaries has purchased, sold, redeemed or cancelled any of the Company's shares during the Period. Disclosure of Directors', Supervisors' and Chief Executive's Interests and Short Positions in the Shares, Underlying Shares and Debentures As at June 30, 2014, none of the Directors, supervisors and chief executives of the Company had any interest or short position in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (Cap 571 of the Laws of Hong Kong) (the "SFO")) as recorded in the register required to be kept pursuant to Section 352 of the SFO, or as otherwise notified to the Company and The Stock Exchange of Hong Kong Limited (the "Stock Exchange") pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") in Appendix 10 to the Rules Governing the Listing of Securities on the Stock Exchange (the "Listing Rules"). Other Interests Discloseable under the SFO As at June 30, 2014, the following shareholders held 5% or more of the issued share capital of the Company according to the register of interests in shares required to be kept by the Company pursuant to Section 336 of the SFO: Percentage of Total interests the issued in number of share capital ordinary shares of the Company Substantial shareholders Capacity of the Company (domestic shares) Zhejiang Communications Investment Group Co., Ltd. Beneficial owner 2,909,260,000 100% Percentage of Total interests the issued in number of share capital ordinary shares of the Company Substantial shareholders Capacity of the Company (H Shares) JP Morgan Chase & Co. Beneficial owner, 201,538,938 (L) 14.05% investment manager and 1,866,000 (S) 0.13% custodian corporation/ 148,181,542 (P) 10.33% approved lending agent BlackRock, Inc. Interest of controlled 130,511,912 (L) 9.10% corporations Invesco Asset Investment manager/ 88,834,000 (L) Management Limited advisor of various accounts Deutsche Bank Investment manager 85,135,815 (L) 5.94% Aktiengesellschaft 3,786,000 (S) 0.26% The letter "L" denotes a long position. The Letter "S" denotes a short position. The Letter "P" denotes interest in a lending pool. Save as disclosed above, as at June 30, 2014, no person had registered an interest or short position in the shares or underlying shares of the Company that was required to be recorded pursuant to Section 336 of the SFO. Compliance with the Corporate Governance Code and the Model Code During the Period, the Company had complied with all code provisions in the Corporate Governance Code and Corporate Governance Report (the "Code") set out in Appendix 14 to the Listing Rules, and had adopted the recommended best practices in the Code as and when applicable. The Company has adopted a code of conduct regarding directors' securities transactions on terms no less exacting than the required standard set out in the Model Code. The Directors have confirmed their full compliance with the required standard set out in the Model Code and its code of conduct regarding directors' securities transactions during the Period. Responsibility Statement of the Directors in Respect of the Interim Report and Accounts Each of the Directors of the Company, whose name and function are listed in the section headed "Corporate Information" of this report, confirms that, to the best of his/her knowledge: - the condensed consolidated financial statements prepared in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants give a true and fair view of the assets, liabilities, financial position and profit of the Group and the undertakings included in the consolidation taken as a whole; - the management discussion and analysis included in the interim report includes a fair review of the development and performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole during the Period, together with a description of the principal risks and uncertainties that the Group faces for the remaining six months of the financial year; and - the interim report include a fair review of the material related party transactions that have taken place during the Period and any material changes in the related party transactions described in the Company's annual report for the year ended 31 December 2013. By order of the Board Zhejiang Expressway Co., Ltd. ZHAN Xiaozhang Chairman Hangzhou, the PRC, August 27, 2014 The electronic version of this report is published on the HKExnews website of the Hong Kong Exchanges and Clearing Limited (http://www.hkexnews.com.hk) and on the Company's website (www.zjec.com.cn). Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended June 30, 2014 2013 Notes Rmb'000 Rmb'000 (Unaudited) (Unaudited) Revenue 3 4,121,822 3,647,268 Operating costs (2,580,471) (2,283,848) Gross profit 1,541,351 1,363,420 Securities investment gains 87,240 79,786 Other income 4 140,164 103,890 Administrative expenses (33,552) (36,126) Other expenses (26,556) (21,401) Share of profit of associates 24,868 4,791 Share of loss of a joint venture (15,602) (13,938) Finance costs 5 (39,869) (43,079) Profit before tax 6 1,678,044 1,437,343 Income tax expense 7 (430,799) (374,175) Profit for the Period 1,247,245 1,063,168 Other comprehensive loss Items that may be subsequently reclassified to profit or loss: Available-for-sale financial assets - Fair values loss during the Period (2,719) (3,681) - Reclassification adjustments for cumulative gain included in profit or loss - (1,381) upon disposal Income tax relating to components of other comprehensive loss 680 1,266 Other comprehensive loss for the Period (net of tax) (2,039) (3,796) Total comprehensive income for the Period 1,245,206 1,059,372 Profit for the Period attributable to: Owners of the Company 1,063,433 930,385 Non-controlling interests 183,812 132,783 1,247,245 1,063,168 Total comprehensive income for the Period attributable to: Owners of the Company 1,062,183 928,429 Non-controlling interests 183,023 130,943 1,245,206 1,059,372 Earnings per share 9 24.49 cents 21.42 cents - Basic and diluted Condensed Consolidated Statement of Financial Position As at As at June 30, December 31, 2014 2013 Note Rmb'000 Rmb'000 (Unaudited) (Audited) NON-CURRENT ASSETS Property, plant and equipment 1,801,968 1,762,042 Prepaid lease payments 67,079 68,156 Expressway operating rights 11,511,820 11,911,133 Goodwill 86,867 86,867 Other intangible assets 145,997 154,564 Interests in associates 597,414 574,733 Interest in a joint venture 318,342 333,944 Available-for-sale investments 160,500 143,514 Other receivables - 401,400 14,689,987 15,436,353 CURRENT ASSETS Inventories 71,277 73,576 Trade receivables 10 116,871 101,428 Loans to customers arising from margin financing business 11 3,256,393 2,946,911 Other receivables and prepayments 12 773,945 451,968 Prepaid lease payments 2,155 2,155 Available-for-sale investments 512,789 281,924 Held for trading investments 1,785,239 1,181,025 Financial assets held under resale agreements 13 1,130,604 874,254 Bank balances held on behalf of customers 9,726,025 8,228,160 Bank balances and cash - Time deposits with original maturity 726,245 704,459 over three months - Cash and cash equivalents 1,773,320 1,806,981 19,874,863 16,652,841 As at As at June 30, December 31, 2014 2013 Note Rmb'000 Rmb'000 (Unaudited) (Audited) CURRENT LIABILITIES Accounts payable to customers arising from securities business 9,686,410 8,167,103 Trade payables 14 511,459 421,994 Tax liabilities 255,147 331,611 Other taxes payable 36,418 53,417 Other payables and accruals 15 1,071,569 995,496 Dividends payable 171,240 94,976 Bank and other borrowings 500,000 540,000 Financial assets sold under repurchase 16 630,531 - agreementsPlacements from other financial institution 560,000 310,000 Short-term loan note 1,000,000 1,000,000 14,422,774 11,914,597 Net current assets 5,452,089 4,738,244 Total assets less current liabilities 20,142,076 20,174,597 Non-current liabilities Bank loans 200,000 300,000 Deferred tax liabilities 200,708 205,638 400,708 505,638 19,741,368 19,668,959 CAPITAL AND RESERVES Share capital 4,343,115 4,343,115 Reserves 11,605,827 11,629,423 Equity attributable to owners of the Company 15,948,942 15,972,538 Non-controlling interests 3,792,426 3,696,421 19,741,368 19,668,959 Condensed Consolidated Statement of Changes in Equity Non- controlling interests Total Attributable to owners of the Company Investment Share Share Statutory Capital revaluation Special Dividend Retained capital premium reserve reserve reserve reserves reserve profits Total Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 At January 4,343,115 3,645,726 3,227,511 1,712 254 18,666 1,042,347 3,240,921 15,520,252 3,496,023 19,016,275 1, 2013 (Audited) Merger - - - - - 797,471 - (273,263) 524,208 81,198 605,406 accounting restatement At January 4,343,115 3,645,726 3,227,511 1,712 254 816,137 1,042,347 2,967,658 16,044,460 3,577,221 19,621,681 1, 2013 (Restated) Profit for - - - - - - - 930,385 930,385 132,783 1,063,168 the Period Other - - - - (1,956) - - - (1,956) (1,840) (3,796) comprehensive loss for the Period Total - - - - (1,956) - - 930,385 928,429 130,943 1,059,372 comprehensive income for the Period Consideration - - - - - (678,005) - - (678,005) (78,863)(756,868) paid for acquisition of a subsidiary under common control Dividend paid - - - - - - - - - (106,008)(106,008) to non-controlling interests Final dividend - - - - - - (1,042,347) (1,042,347) - (1,042,347) Proposed interim - - - - - - 260,587 (260,587) - - - dividend At June 4,343,115 3,645,726 3,227,511 1,712 (1,702) 138,132 260,587 3,637,456 15,252,537 3,523,293 18,775,830 30, 2013 (Unaudited) At January 4,343,115 3,645,726 3,545,859 1,712 1,801 138,132 1,085,779 3,210,414 15,972,538 3,696,421 19,668,959 1, 2014 (Audited) Profit for - - - - - - - 1,063,433 1,063,433 183,812 1,247,245 the Period Other - - - - (1,250) - - - (1,250) (789) (2,039) comprehensive loss for the Period Total - - - - (1,250) - - 1,063,433 1,062,183 183,023 1,245,206 comprehensive income for the Period Dividend paid - - - - - - - - - (87,018)(87,018) to non-controlling interest Final dividend - - - - - - (1,085,779) - (1,085,779) -(1,085,779) Proposed interim - - - - - - 260,587 (260,587) - - - dividend At June 4,343,115 3,645,726 3,545,859 1,712 551 138,132 260,587 4,013,260 15,948,942 3,792,426 19,741,368 30, 2014 (Unaudited) Condensed Consolidated Statement of Cash Flows For the six months ended, 2014 2013 Rmb'000 Rmb'000 (Unaudited) (Unaudited) Net cash from operating activities 1,401,752 1,050,327 Net cash used in investing activities (218,880) (709,921) Net cash used in financing activities (1,216,533) (959,622) Net decrease in cash and cash equivalents (33,661) (619,216) Cash and cash equivalents at beginning of the Period 1,806,981 3,392,053 Cash and cash equivalents at end of the Period 1,773,320 2,772,837 Notes to Condensed Consolidated Financial Statements 1. BASIS OF PREPARATION The condensed consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard 34 Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants (the "HKICPA") as well as with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules"). 2. PRINCIPAL ACCOUNTING POLICIES The condensed consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at fair value, as appropriate. Except as disclosed below, the accounting policies and methods of computation applied in the condensed consolidated financial statements for the Period are consistent with those in the preparation of the Group's annual financial statements for the year ended December 31, 2013. Financial assets sold under repurchase agreements Financial assets sold subject to agreements with a commitment to repurchase at a specific future date are not derecognised in the condensed consolidated statement of financial position. The proceeds from selling such assets are presented under "financial assets sold under repurchase agreements" in the condensed consolidated statement of financial position. The difference between the selling price and repurchasing price is recognised as interest expense during the term of the agreement using the effective interest method. In the Period, the Group has applied, for the first time, new interpretation and amendments to Hong Kong Financial Reporting Standards ("HKFRSs") issued by HKICPA, which are effective for the Period. The application of the new interpretation and amendments to HKFRSs during the Period has had no material effect on the condensed consolidated financial statements and/or relevant disclosures set out in these condensed consolidated financial statements. 3. REVENUE AND SEGMENT INFORMATION Compared to the same period last year, there were no major changes in the reportable and operating segments of the Group during the Period. Segment revenue and results The following is an analysis of the Group's revenue and results by reportable and operating segments: For the six months ended June 30, 2014 Toll related operation Service Other area and toll road Toll advertising related Securities Total operation businesses service operation Segment Elimination Total Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) Revenue External sales 2,041,188 1,183,241 19,050 878,343 4,121,822 - 4,121,822 Inter-segment sales - 2,377 4,459 - 6,836 (6,836) - Total 2,041,188 1,185,618 23,509 878,343 4,128,658 (6,836) 4,121,822 Segment profit 942,673 63,071 18,789 222,712 1,247,245 1,247,245 For the six months ended June 30, 2013 Toll related operation Service Other area and toll road Toll advertising related Securities Total operation businesses service operation Segment Elimination Total Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) Revenue External sales 1,921,545 1,010,644 - 715,079 3,647,268 - 3,647,268 Inter-segment sales - 2,377 - - 2,377 (2,377) - Total 1,921,545 1,013,021 - 715,079 3,649,645 (2,377) 3,647,268 Segment profit 868,464 20,250 7,589 166,865 1,063,168 1,063,168 --------- Segment profit represents the profit after tax of each operating segment. This is the measure reported to the chief operating decision maker - the Company's General Manager, for the purpose of resource allocation and performance assessment. 3. REVENUE AND SEGMENT INFORMATION (Continued) Revenue from major services An analysis of the Group's revenue, net of discounts and taxes, for the Period is as follows: For the six months ended June 30, 2014 2013 Rmb'000 Rmb'000 (Unaudited) (Unaudited) Toll operation revenue 2,041,188 1,921,545 Service area businesses revenue (mainly sales of goods) 1,134,635 958,740 Advertising business revenue 48,606 51,904 Commission income from securities operation 595,994 538,279 Interest income from securities operation 282,349 176,800 Others 19,050 - Total 4,121,822 3,647,268 4. OTHER INCOME For the six months ended June 30, 2014 2013 Rmb'000 Rmb'000 (Unaudited) (Unaudited) Interest income on bank balances, entrusted loan receivables and financial products investment 34,494 45,746 Rental income 55,155 32,652 Gain on disposal of an associate (Note) 24,490 - Handling fee income 1,487 2,193 Towing income 4,695 4,883 Exchange gain, net 861 14 Others 18,982 18,402 Total 140,164 103,890 Note: The Company instituted legal proceedings with regards to the transfer of the equity interest in JoinHands Technology Co., Ltd. ("JoinHands Technology", a 27.582% owned associate) and then lodged an appeal against the subsequent judgment of the Company's priority of compensation for the mortgaged properties. The appeal was ruled in favor of the Company by the Hangzhou Intermediate People's Court on April 28, 2013. These mortgaged properties in JoinHands Technology were auctioned off by the court and the Company has received Rmb23,834,000 on May 16, 2014. From then on, JoinHands Technology was no longer an associate of the Company. For the Period, gain on disposal of an associate amounted to Rmb24,490,000 was recoginised. 5. FINANCE COSTS For the six months ended June 30, 2014 2013 Rmb'000 Rmb'000 (Unaudited) (Unaudited) Interest expenses wholly repayable within 5 years: Bank and other borrowings 14,425 40,379 Long-term bonds - 2,700 Short-term loan note 28,845 - Total borrowing costs 43,270 43,079 Less: Amount capitalised in the cost of qualifying assets (3,401) - 39,869 43,079 6. PROFIT BEFORE TAX The Group's profit before tax has been arrived at after charging: For the six months ended June 30, 2014 2013 Rmb'000 Rmb'000 (Unaudited) (Unaudited) Depreciation of property, plant and equipment 88,812 95,632 Amortisation of prepaid lease payments 1,077 1,087 Amortisation of expressway operating rights 404,193 403,604 (included in operating costs) Amortisation of other intangible assets 10,033 8,978 (included in operating costs) Cost of inventories recognised as an expense 1,045,030 871,039 7. INCOME TAX EXPENSE For the six months ended June 30, 2014 2013 Rmb'000 Rmb'000 (Unaudited) (Unaudited) Current tax: PRC Enterprise Income Tax 435,049 388,811 Deferred tax (4,250) (14,636) 430,799 374,175 Under the Law of the PRC on Enterprise Income Tax (the "EIT Law") and Implementation Regulation of the EIT Law, the applicable tax rate of the Group is 25%. No Hong Kong Profits Tax has been provided as the Group's income neither arises in, nor is derived from Hong Kong during the Period. 8. DIVIDENDS The Directors have recommended the payment of an interim dividend of Rmb6 cents per share (corresponding period of 2013: Rmb6 cents per share), subject to shareholders' approval at the extraordinary general meeting of the Company. 9. EARNINGS PER SHARE The calculation of the basic earnings per share is based on profit for the Period attributable to owners of the Company of Rmb1,063,433,000 (corresponding period of 2013: Rmb930,385,000) and the 4,343,114,500 (2013: 4,343,114,500) ordinary shares in issue during the Period. Diluted earnings per share presented is the same as basic earnings per share since there were no potential ordinary shares outstanding during both periods. 10. TRADE RECEIVABLES As at As at June 30, December 31, 2014 2013 Rmb'000 Rmb'000 (Unaudited) (Audited) Trade receivables comprise: A fellow subsidiary 1,500 3,077 Third parties 116,043 99,023 Total trade receivables 117,543 102,100 Less: Allowance for doubtful debts (672) (672) 116,871 101,428 The Group has no credit period granted to its trade customers of toll operation and service area businesses. The Group's trade receivable balance for toll operation is toll receivables from the Expressway Fee Settlement Centre of the Highway Administration Bureau of Zhejiang Province, which are normally settled within 3 months. All of these trade receivables were neither past due nor impaired in both periods. In respect of the Group's asset management service operated by Zheshang Securities Co., Ltd., trading limits are set for customers. The Group seeks to maintain tight control over its outstanding accounts receivable in order to minimise credit risk. Overdue balances are regularly monitored by management. The following is an aged analysis of trade receivables, net of allowance for doubtful debts presented based on the invoice date at the end of the reporting period, which approximated the respective revenue recognition dates: As at As at June 30, December 31, 2014 2013 Rmb'000 Rmb'000 (Unaudited) (Audited) Within 3 months 97,317 90,812 3 months to 1 year 19,391 10,453 Over 2 years 163 163 Total 116,871 101,428 11. LOANS TO CUSTOMERS ARISING FROM MARGIN FINANCING BUSINESS The Group has provided customers with margin financing and securities lending for securities transactions, the credit facility limits to margin clients are determined by the discounted market value of the collateral securities accepted by the Group. All of the loans to margin clients which are secured by the underlying pledged securities are interest bearing. The Group maintains a list of approved stocks for margin lending at a specified loan to collateral ratio. Any excess in the lending ratio will trigger a margin call which the customers have to make good of the shortfall. The Group has the right to process forced liquidation if the customer fails to make good of the shortfall within a short period of time. As at June 30, 2014, loans to customers under the margin financing and securities lending activities carried out in the PRC were secured by the customers' stock securities and cash collaterals. The undiscounted market value of the stock security collaterals was amounted to Rmb9,581,111,000 (December 31, 2013: Rmb8,207,640,000). Cash collateral of Rmb246,610,000 (December 31, 2013: Rmb222,313,000) received from clients has been included in accounts payable to customers arising from securities business. No aged analysis is disclosed as in the opinion of the directors, the aged analysis does not give additional value in view of the nature of business of securities margining financing. 12. OTHER RECEIVABLES AND PREPAYMENTS As at As at June 30, December 31, 2014 2013 Rmb'000 Rmb'000 (Unaudited) (Audited) Current: Entrusted loans receivables from 474,654 54,000 related parties (Note 17(ii)) Interest receivables 112,523 122,392 Prepayments 44,107 30,195 Financial products investment 62,000 168,000 receivables (Note a) Others 80,661 77,381 773,945 451,968 Non-current: Entrusted loans receivables from - 401,400 related parties (Note 17(ii)) - 401,400 773,945 853,368 Note: (a) Short-term fixed-yield and principal protected bank financial products. 13. FINANCIAL ASSETS HELD UNDER RESALE AGREEMENT As at As at June 30, December 31, 2014 2013 Rmb'000 Rmb'000 (Unaudited) (Audited) Analysed by collateral type: Bonds 153,503 20,500 Stock securities (Note) 977,101 853,754 1,130,604 874,254 Analysed by market: Shanghai/Shenzhen Stock Exchange 1,130,604 874,254 Note: The financial assets (pledged by stock) held under resale agreements are those resale agreements which qualified investors entered into with the Group to purchase the specified securities at a predetermined price and a predetermined day in the future. 13. FINANCIAL ASSETS HELD UNDER RESALE AGREEMENT (Continued) The collaterals include both equity and debt securities listed in the PRC. As at June 30, 2014, the fair value of equity and debt securities as collaterals was Rmb2,650,255,000 (December 31, 2013: Rmb1,915,221,000) and Rmb153,622,000 (December 31, 2013: Rmb20,500,000), respectively. 14. TRADE PAYABLES Trade payables mainly represent the construction payables for the maintenance projects of toll expressways. The following is an aged analysis of the trade payables presented based on the invoice date at the end of the reporting period: As at As at June 30, December 31, 2014 2013 Rmb'000 Rmb'000 (Unaudited) (Audited) Within 3 months 214,332 214,669 3 months to 1 year 193,375 82,048 1 to 2 years 39,635 29,518 2 to 3 years 6,652 8,496 Over 3 years 57,465 87,263 Total 511,459 421,994 15. OTHER PAYABLES AND ACCRUALS As at As at June 30, December 31, 2014 2013 Rmb'000 Rmb'000 (Unaudited) (Audited) Other liabilities: Accrued payroll and welfare 576,568 544,469 Advance from customers 60,522 94,124 Toll collected on behalf of other toll roads 3,021 5,057 Retention payable 126,545 143,807 Others 281,882 192,382 1,048,538 979,839 Other accruals 23,031 15,657 Total 1,071,569 995,496 16. Financial assets sold under repurchase agreements Sales and repurchase agreements are transactions in which the Group sells a security and simultaneously agrees to repurchase it (or an asset that is substantially the same) at a fixed price on a future date. Since the repurchase prices are fixed, the Group is still exposed to substantially all the credit risks and market risks and rewards of those securities sold. These securities are not derecognised but regarded as "collateral" for the secured lending from these counterparties because the Group retains substantially all the risks and rewards of these securities. In addition, the cash received is recognised as financial liability. As at 30 June, 2014, the Group entered into repurchase agreements with certain counterparties. The proceeds from selling such securities are presented as financial assets sold under repurchase agreements. The cash advanced to the Group were interest bearing. Because the Group sells the contractual rights to the cash flows of the securities, it does not have the ability to use the transferred securities during the term of the arrangement. 17. RELATED PARTY TRANSACTIONS AND BALANCES The following is a summary of the related party transactions during the Period: (i) Transactions and balances with government related parties The Group operates in an economic environment currently predominated by entities directly or indirectly owned or controlled by the PRC government ("government-related entities"). In addition, the Group itself is part of a larger group of companies under the Communications Group which is controlled by the PRC government. However, due to the business nature, in respect of the Group's toll road business and securities business, the directors are of the opinion that it is impracticable to ascertain the identity of counterparties and accordingly whether the transactions are with other government-related entities in the PRC. Details of other significant transactions with government related parties are summarised below: (a) Transactions with Communications Group Pursuant to the leasing and operation agreement entered into between Zhejiang Jinhua Yongjin Expressway Co., Ltd. ("Jinhua Co", a 100% owned subsidiary of the Company) and Zhejiang Communications Investment Group Industrial Development Co., Ltd. (Zhejiang Communications Investment, a fellow subsidiary of Communications Group), Jinhua Co leased the toll road service area to Zhejiang Communications Investment and Zhejiang Communications Investment managed the operation of the service area and the advertising business in respect of the toll road service area. Such business began from January 1, 2011, and will be expired at the same time with the operating right for Jinhua Section in 2030. For the six months ended June 30, 2014, Jinhua Co earned the leasing income of Rmb1,500,000 (corresponding period of 2013: Rmb1,500,000). 17. RELATED PARTY TRANSACTIONS AND BALANCES (Continued) (i) Transactions and balances with government related parties (Continued) (b) Transactions with other government related parties (1) Pursuant to the operation management agreement entered into between Zhejiang Expressway Investment Development Co., Ltd. ("Development Company", a wholly owned subsidiary of the Company), and Zhejiang Expressway Petroleum Development Co., Ltd. ("Petroleum Company") in respect of the petrol stations in the service areas along Shanghai-Hangzhou-Ningbo and Shangsan Expressways. Petroleum Company assists Development Company in running their petrol stations along these roads. During the Period, purchase of petroleum products from Petroleum Company totaled Rmb988,858,000 (corresponding period of 2013: Rmb811,976,000). Petroleum Company is a government related party and also an associate of the Group. (2) The Group has entered into various significant transactions, including deposit placements, borrowings and other general banking facilities, with certain banks and financial institutions which are government-related entities in its ordinary course of business. In view of the nature of those banking transactions, the directors are of the opinion that separate disclosure would not be meaningful. (ii) Transactions and balances with associates and other non-government related parties (1) On July 25, 2013 and December 30, 2013, Zhejiang Communications Finance provided the Company with short-term loans amounted to Rmb190,000,000 and Rmb150,000,000, at a fixed interest rate of 5.04% per annum, with maturity date of January 24, 2014 and March 31, 2014 respectively. Such loans were repaid on the maturity date. On June 9, 2014, Zhejiang Communications Finance provided the Company with short- term loans amounted to Rmb400,000,000, at a fixed interest rate of 5.04%, with maturity date of December 9, 2014. During the Period, the relevant interest expense amounted to Rmb3,293,000. Such loan was early settled before the issue date of the report. (2) Pursuant to the board resolutions of the Company as at August 28, 2010 and the entrusted loan contracts, the Company continued to provide entrusted loans totaling Rmb400,000,000, with a term of 18 months, to Zhejiang Canal Concord Property Co., Ltd. ("Zhejiang Canal Concord", a subsidiary of the Group's associate), at a fixed interest rate of 12% per annum. Such entrusted loans are guaranteed by World Trade Center Zhejiang Real Estate Development Co., Ltd. ("World Trade Ltd"), in full. 17. RELATED PARTY TRANSACTIONS AND BALANCES (Continued) (ii) Transactions and balances with associates and other non-government related parties (Continued) (3) Pursuant to the board resolutions of Development Company on April 22, 2013, and the entrusted loan contract, Development Company provided entrusted loan on April 27, 2013 totalling Rmb50,000,000 with maturity date of April 27, 2014 to Zhejiang Canal Concord, at a fixed interest rate of 12% per annum. Such entrusted loan was guaranteed by World Trade Ltd in full and was repaid on the maturity date. Development Company continued to provide entrusted loan on May 28, 2014 totalling Rmb50,000,000 with maturity date of May 27, 2015 to Zhejiang Canal Concord, at a fixed interest rate of 12% per annum. Such entrusted loan is guaranteed by World Trade Ltd in full. For the six months ended June 30, 2014, the interest income recognised on the above entrusted loan transactions with the associate were Rmb24,940,000 (corresponding period of 2013: Rmb23,548,000). Interest receivables as at June 30, 2014 on the above entrusted loan transactions with the associate were Rmb24,654,000 (December 31, 2013: Rmb5,400,000). The amount will be repaid at maturity. (4) The Group has entered into a financial services agreement with Zhejiang Communications Finance. Pursuant to the agreement, Zhejiang Communications Finance agreed to provide the Group with Deposit Services, the Loan and Financial Leasing Services, the Clearing Services and Other Financial Services. On June 30, 2014, the balance of the Group under account of Zhejiang Communications Finance is Rmb194,827,000 (December 31, 2013: Rmb60,443,000). 18. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS This note provides information about how the Group determines fair value of various financial assets and financial liabilities. Fair value measurements recognised in the condensed consolidated statement of financial position that are measured at fair value on a recurring basis Some of the Group's financial assets and financial liabilities are measured at fair value at the end of each reporting period. The following table gives information about how the fair value of these financial assets and financial liabilities are determined (in particular, the valuation technique(s) and input(s) used). Relationship of Basis of fair value unobservable Fair value measurement/valuation Significant inputs Fair value as at hierachy technique(s) and key input(s) unobservable input(s) to fair value Financial Classified June 30, December 31, assets as 2014 2013 Rmb'000 Rmb'000 (Unaudited)(Audited) 1)Equity Held Assets - Assets - Level 1 Quoted bid prices in N/A N/A investment for 111,370 78,658 an active market listed trading in investments exchange 2)Equity Held Assets - - Level 1 Quoted bid prices in N/A N/A securities for 1,406 an active market and trading Open investments -ended equity funds Held Assets - Assets - Level 2 Shares of the net assets N/A N/A for 5,176 5,242 of the products, determined with trading reference to the net asset value investments of the products, calculated by observable (quoted) prices of underlying investment portfolio and adjustment of related expenses. 3)Fund Available Assets - Assets - Level 1 Quoted bid prices in N/A N/A listed -for 40,894 44,574 an active market in -sale exchange investment 4)Debt Held Assets - Assets - Level 1 Quoted bid prices N/A N/A investments for 588,979 443,810 in an active market listed trading in investments exchange and debt investment in interbank market Available Assets - Assets - Level 1 Quoted bid prices N/A N/A -for 127,000 127,000 in an active market -sale investment Held Assets - Assets - Level 2 Discounted cash flow. N/A N/A for 1,078,308 653,315 Future cash flows are estimated trading on applying the interest curves of investments different types of bonds as the key parameter. 18. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS (Continued) Relationship of Basis of fair value unobservable Fair value measurement/valuation Significant inputs Fair value as at hierachy technique(s) and key input(s) unobservable input(s) to fair value Financial Classified June 30, December 31, assets as 2014 2013 Rmb'000 Rmb'000 Level 2 (Unaudited)(Audited) 5)Investment Available Assets- Assets- Shares of the net assets of N/A N/A in -for 211,200 126,948 the products, determined with structured -sale reference to the net asset value products investment of the products, calculated by observable (quoted) prices of underlying investment portfolio and adjustment of related expenses. Assets- Assets- Level 3 Discounted cash flow. Future cash Actual yield The higher 163,031 74,402 flows are estimated based on of the the actual applicable yield of underlying underlying yield, investment portfolio and adjustment investment the higher of related expenses, discounted portfolio the fair at a rate that reflects the and the value credit risk of various discount rate counterparties 6)Investment Available Assets- Assets- Level 3 Discounted cash flow. Future cash Actual yield The higher in trust -for 92,664 41,514 flows are estimated based on of the the actual products -sale applicable yield of underlying underlying yield, the investment investment portfolio and adjustment investment higher the of related expenses, discounted portfolio fair value at a rate that reflects the and the credit risk of various discount rate counterparties 18. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS (Continued) As at June 30, 2014 (Unaudited) Level 1 Level 2 Level 3 Total Rmb'000 Rmb'000 Rmb'000 Rmb'000 Held for trading investments - Equity securities a. Manufacturing 56,612 - - 56,612 b. Finance service 27,769 - - 27,769 c. Information technology service 6,020 - - 6,020 d. Energy and water service 2,898 - - 2,898 e. Transportation, storage and 2,057 - - 2,057 postal service f. Real Estate 3,805 - - 3,805 g. Construction 2,435 - - 2,435 h. Mining 5,055 - - 5,055 i. Wholesaling 2,260 - - 2,260 j. Agriculture, forestry, fishing and 262 - - 262 animal husbandry k. Leasing and commercial service 788 - - 788 l. Culture, Sports and Entertainment 749 - - 749 m. Others 660 - - 660 Sub-total 111,370 - - 111,370 - Open-ended fund 1,406 5,176 - 6,582 - Corporate bonds 588,979 1,078,308 - 1,667,287 Sub-total 701,755 1,083,484 - 1,785,239 Available-for-sale investments - Fund 40,894 - - 40,894 - Corporate bonds 127,000 - - 127,000 - Structured products - 211,200 163,031 374,231 - Trust products - - 92,664 92,664 Sub-total 167,894 211,200 255,695 634,789 18. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS (Continued) As at December 31, 2013 (Audited) Level 1 Level 2 Level 3 Total Rmb'000 Rmb'000 Rmb'000 Rmb'000 Held for trading investments - Equity securities a. Manufacturing 43,720 - - 43,720 b. Finance service 15,482 - - 15,482 c. Information technology service 6,396 - - 6,396 d. Energy and water service 3,057 - - 3,057 e. Transportation, storage and 1,218 - - 1,218 postal service f. Real Estate 2,002 - - 2,002 g. Construction 1,539 - - 1,539 h. Mining 2,937 - - 2,937 i. Wholesaling 1,170 - - 1,170 j. Agriculture, forestry, fishing and 366 - - 366 animal husbandry k. Others 771 - - 771 78,658 - - 78,658 - Open-ended fund - 5,242 - 5,242 - Corporate bonds 443,810 653,315 - 1,097,125 Sub-total 522,468 658,557 - 1,181,025 Available-for-sale investments - Fund 44,574 - - 44,574 - Corporate bonds 127,000 - - 127,000 - Structured products - 126,948 74,402 201,350 - Trust products - - 41,514 41,514 Sub-total 171,574 126,948 115,916 414,438 There were no transfers between instruments in Level 1 and Level 2 in the current and prior period. 18. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS (Continued) The following table represents the changes in Level 3 available-for-sale investments. Structured Trust products products Total Rmb'000 Rmb'000 Rmb'000 As at January 1, 2013 - - - Addition 74,810 41,000 115,810 Total (loss) gain recognised in other comprehensive income (408) 514 106 As at December 31, 2013 74,402 41,514 115,916 Addition 138,770 52,500 191,270 Disposal (49,500) (500) (50,000) Total loss recognised in other comprehensive loss (641) (850) (1,491) As at June 30, 2014 163,031 92,664 255,695 19. SUMMARY OF FINANCIAL INFORMATION OF THE COMPANY As at As at June 30, December 31, 2014 2013 Rmb'000 Rmb'000 (Unaudited) (Audited) Investments in subsidiaries 6,640,021 6,610,021 Amounts due from subsidiaries 537,549 328,324 Other assets 6,559,357 6,645,966 13,736,927 13,584,311 Total liabilities 1,909,325 1,323,793 Capital and reserves Share capital 4,343,115 4,343,115 reserves 7,484,487 7,917,403 11,827,602 12,260,518 20. EVENTS AFTER THE REPORTING PERIOD As at August 14, 2014, Zheshang Securities, together with Yangshengtang Co., Ltd., an independent third party, auctioned off their respective 25% equity interest (totaling 50%) in Zheshang Fund Management Co., Ltd. in the manner of a bundled transfer through electronic bidding at Zhejiang Property and Stock Exchange. The hammer price reached at Rmb414,000,000 offered by Tonglian Capital Management Co., Ltd., another shareholder (independent from the Group) of Zheshang Fund. Zheshang Securities will receive a consideration of Rmb207,000,000. The equity transfer is still subject to approval from China Securities Regulatory Commission and equity transfer registration. Upon the disposal of such equity interest, Zheshang Securities will have no equity interest in Zheshang Fund any more. 21. APPROVAL OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The condensed consolidated financial statements were approved and authorised for issue by the board of directors on August 27, 2014. 2014 Environmental and Social Responsibility Report I. Scope of Report The scope of this environmental and social responsibility report covers the Company and its subsidiaries with businesses related to expressway operations. Zheshang Securities Co. Ltd. and its affiliates, joint ventures and joint-stock companies are not included in this report. II. Reporting Period This environmental and social responsibility report covers the reporting period from 1 July 2013 to 30 June 2014. III. Environmental and Social Responsibility Report 1. Quality of Work Environment (1) Work Environment Employees are the foundation for the Company's survival and development as well as the Company's valuable assets. The Company is committed to creating the corporate values of integrity, harmony, openness and progressiveness, providing employees with a good working environment and relaxed working atmosphere, and striving to establish a career platform on which the full potential of employees can be realized. Through a number of recruitment channels including campus recruitment, social recruitment, recommendation, self- recommendation, and recruitment agencies, the Company enlists talent and builds talent reserves that are in line with the Company's strategic requirements. A remuneration philosophy of grading by job specification, promotion by ability, and compensation adjusted by performance have been implemented. Compensation and benefits such as basic salaries, incentive payments, paid vacations, supplemental medical scheme and corporate annuity are provided. Career development paths such as competition for positions, two-way selection process, democratic recommendation and tasks swapping between employees have been implemented. In order to resolve the employees' parking problem at the frontline stations, the company invested RMB1,090,000 during the reporting period for the construction of parking sheds by way of repairing and reconstructing the administration buildings at the Hangzhou management office, Shaoxing management office and the information centre. As at the end of the reporting period, there were a total of 3,770 employees of the Company, among them 488 were hired by third-party employment agencies. The percentage of male employees and the percentage of female employees were 56.6% and 43.4% respectively. During the reporting period, the employee turnover was 169, representing 4.5% of the Company's total number of employees. (2) Occupational Health and Safety The Company adheres to the production safety policy of "people-oriented production and safe development", and upholds the management principle of seamless integration between business operation and production safety. A responsibility system of production safety targets and risk-based deposits system have been implemented. Standardized safety operation procedures specific to the job positions have been implemented. Identification of potential sources of occupational health and safety hazards, assessment of risks and formulation of control measures are carried out from time to time. The Company's occupational health and safety management system has been certified by a third-party organization Hangzhou WIT Certification Co. Ltd. From time to time, the Company also carries out various forms of safety alert education sessions and training, as well as activities of special themes such as "identification of hidden risks", "knowing and carrying out responsibilities" and "production safety month". The Company provides personal accident insurance for all employees, arranges for regular staff medical inspections, and procures labour protection supplies for the protection of employees as necessary. During the reporting period, the Company spent RMB544,000 for the purchase of employees' personal accident insurance, RMB933,000 for staff medical inspections and RMB7,598,000 for the procurement of labour safety supplies and subsidies for use by the employees. During the reporting period, 7 cases of injured employees were reported, representing 0.2% of the total number of employees, while there was no fatal case of employees that was work-related. (3) Development and Training Staff development and training are pertinent to uplift employees' capabilities as well as to sustain the Company's development. The Company provides all staff with four types of training, namely new employee orientation programs, internal training, external training and online training. Employees are encouraged to participate in further education through appropriate incentives for those who have met training requirements and achieved results. According to the specific characteristics of different job positions, training including integrated management knowhow training, professional and technical business training, and production job skills training are provided in different categories and degrees of depth for the improvement of employees' technical capabilities and management skills. During the reporting period, the Company has actively carried out various types of education and training tasks. The expenditure for training and development amounted to RMB4,410,000 and the accumulated training reached a total of 72,000 man-class-hours. The average training hours for senior staff, mid-level staff and junior staff were approximately 40 class-hours, 31 class-hours and 19 class-hours, respectively. (4) Building a Corporate Culture Corporate culture is the soul of the Company's development and its soft power equipped to beat the competition. During the reporting period, the Company was facing new circumstances and new challenges of reforms and innovations as well as restructuring and development. After a comprehensive selection process, Beijing AproaChina Investment and Management Consulting Co. Ltd. was selected to help the Company rebuild its corporate culture. Through processes including corporate culture diagnosis, corporate culture refinement, corporate culture discussions among all staff, and corporate culture establishment and promotion, a system of corporate culture which is appropriate for the Company's development needs has been established, at the same time consolidating and summarizing the fine traditions the Company has accumulated over the past 17 years since the establishment of the Company. A corporate culture handbook was prepared, a three-year corporate culture development plan was formulated and the establishment of "Home for Employees" and staff club for the frontline staff was greatly supported, with an aim to enhance internal vitality and stimulate the employees' enthusiasm for work, pro-activeness and initiatives so that they can support and safeguard the Company's new developments. (5) Labour Standards The Company supports and complies with the labour and employment laws and regulations, adheres to fair and equitable employment policies, and condemns the use of child labour and forced labour. Employment contracts are signed for 100% with all employees. The Company has established a collective bargaining process for the negotiation of employees' wages and has set up a system in which any major issues that may affect labour rights would require the consideration by and consent from the employees' representatives. A labour dispute arbitration committee has been put in place for the employees to protect labour rights. Dedicated rooms for psychological counseling and expressing emotion have also been established at the frontline stations. These facilities are manned by qualified, part-time psychological counselors who offer psychological consultations and counseling services to the employees, and guide them toward the maintenance of rational and peaceful minds, congenial work environments and contented lives. A distress relief fund (the distribution of which is in form of festive regards and living subsidies) has been established by the Company for the purposes of resolving special living difficulties of its staff resulted from critical illness and accidents. With the practical circumstances in mind, the Company has formulated the "Employee Retirement Administrative Guideline", which provides alternatives to properly resolve the actual difficulties of the elderly employees who are unable to fulfill the job requirements of their current positions. During the reporting period, the Company did not employ any child labour, nor has there been any labour dispute. 2. Environmental Protection (1) Emissions Protecting the environment is a shared responsibility of every member of society. The Company is primarily engaged in the investment, development and operation of high-grade highways. Although they are different from businesses which are involved in operations with direct impact to the environment, there are still certain direct or indirect impacts to the environment. The Company strictly complies with all environment-related laws and regulations. Environmental assessments are conducted according to relevant policy requirements. Wastewater disposal in the serviced areas as well as dust emission during the asphalt mixing process are in line with national standards. The "low-carbon, environmental friendly and high efficiency" asphalt pavement process which makes use of hot in-place recycling technique to achieve reduced use of asphalt mixture and enhance recycled materials for reuse is promoted and implemented. The Company's environmental management system has been certified by a third-party organization Hangzhou WIT Certification Co. Ltd. Reporting Period Wastewater from toilets, restaurants and plaza within the service areas 743,000 metric tons Compliance rate of discharged wastewater 100% Recovered waste asphalt mixture 84,000 metric tons Reused of waste asphalt mixture 10,000 metric tons Dust emission compliance rate for hot mix asphalt 100% (2) Resource Consumption The Company encourages all staff to conserve resources for the improvement of the environment and cost reduction. On the basis that quality of products and services are ensured, the Company strives to minimize the quantity used as well as wastage during the resource utilization processes, to use energy-saving, low-power technology and products as much as possible, to adopt energy-efficient light sources for the energy saving transformation of lighting equipment, and to encourage and support staff to bring up justifiable suggestions about energy conservation and energy saving. Reporting Period Water[Note 1] 1,848,000 metric ton Electricity[Note 1] 36,384,000 kWh Steam 2,392.7 metric ton Fuel Gasoline 760.6 metric ton Diesel 1,688.70 metric ton Heavy oil 2,892.2 metric ton Note 1: The water and electricity charges for the Company's headquarters are included in the property management fees and are difficult to estimate. As such, the data on water and electricity consumption excludes the water and electricity consumed by the Company's headquarters. (3) Environment and Natural Resources The Company adopts an energy-saving and green environmental management policy. Integrated with the specific locations and environment of the frontline toll stations, "Beautiful Stations" are erected with planting of greeneries, fruit trees and seasonal crops, with an aim to create a rural economy and achieve a greener environment at the same time, to enhance the appearances of the frontline stations and to improve the work environment of the frontline staff. In the office areas, the Company places green plants at appropriate spots according to the spatial arrangements at work place so as to create a vibrant atmosphere in the work environment. Video conferencing, office automation and email systems are widely used by the Company. Daily consumption of paper and office supplies is minimized and double-sided printing in the offices is encouraged to reduce the consumption of paper and its impact on the environment. During the reporting period, the Company consumed 820 cartons of paper (each carton contains 5,000 pieces of paper). 3. Operation Practices (1) Management of Suppliers The selection and identification of suppliers for the Company is subject to the "Guidelines on Management of Company's Bidding" issued by the Company. The procurements which are within the scope and meet the standards should be processed by way of tender, competitive negotiation and quotation comparison, and are conducted based on the principles of transparency, fairness, equity and integrity. The Company has established a bidding management committee and a bid evaluation committee. Any member of the bid evaluation committee who is found connected to potential suppliers must abstain from the evaluation. In relation to maintenance projects, equipment replacements, asphalt and stone procurements, the Company identified 50 suppliers by way of tender, with total procurement amounted to RMB280,427,000 during the reporting period. (2) Security System The Company's quality management policy is to ensure safety, accessibility, quality and efficiency. Its core responsibilities in respect of products and services are to ensure that highways and ancillary facilities are intact, smooth and accessible. In order to best fulfill its core responsibilities, the Company has prepared mid to long- term road maintenance plans as well as annual maintenance schedules, established a standardized toll services system, formed an emergency team and set up a response mechanism for traffic accidents. An integrated support service combining dining, shopping, sanitation, fueling and vehicle repair has been established. Equipment repairs, maintenance and emergency handling procedures were standardized. An operational system for the assurance of occupational health and production safety was formulated. Access to the Zhejiang Provincial expressway service hotline 12122 has been set up. The retention period for vehicles images and inquiry procedures were standardized. With a team who provides courteous customer service and collects tolls only according to defined charging mechanism, the Company's quality management system has been certified by a third-party organization Hangzhou WIT Certification Co. Ltd. During the reporting period, the Company invested RMB391,878,000 on road maintenance for road surface treatment of 408,000 square meters of defective road surface, 70.5 kilometers of pavement overlay (single carriageway), overlay at 196 bridgeheads as well as protection and reinforcement of 33 high slopes. As inspected by the Zhejiang Road Administration Bureau, the pavement quality indices (PQI) of Shanghai-Hangzhou-Ningbo Expressway, Shangsan Expressway and Ningbo-Jinhua Expressway were 94.3, 94.4 and 94.1, respectively, all of which have met the highest standards recognized by the government transportation authority, and was named as a "2013 Progressive Unit in Zhejiang Province Highway Maintenance Responsibilities Targets Inspection". The Company monitors the full length of highways and carries out regular road inspections and special inspections in response to abnormal weather and events, with an aim to detect abandoned objects or spilled materials on expressways as early as possible and to take appropriate measures to clean or to remove them. Public liability insurances are purchased to cover the potential loss suffered by the Company as a result of traffic accidents caused by abandoned objects or spillage on roads. During the reporting period, there were 487 traffic accidents along Shanghai-Hangzhou-Ningbo Expressway, Shangsan Expressway and Ningbo-Jinhua Expressway caused by abandoned objects or spillage on roads, of which 13 were covered by the Company's public liability insurances and compensated by the insurance company for the benefit of the parties involved. There was no similar traffic accident for which the court held that the Company had to be liable for the compensation. During the reporting period, the full length of the Shanghai-Hangzhou-Ningbo Expressway, Shangsan Expressway and Ningbo-Jinhua Expressway were open for 331 days, inaccessible or closed for 34 days (including complete closure, closure of certain lanes, closure for a specified period, closure of toll stations and traffic diversion from main roads, etc.) due to causes such as traffic accidents, bad weather and road construction. The total number of the Company's ETC lanes reached 104, and a total of 22 automatic card issuing lanes at the entrances were added. The throughput of vehicles reached 144,598,000 units. During the reporting period, the Company's 24-hour service hotline received a total of approximately 4,500 inquiries, of which 106 were related to customer complaints, representing a complaint rate of seven millionths (0.00007%) and the ratio of complaint handling and response was 100%. 1,109 customers were randomly selected for customer satisfaction survey and the results demonstrated that the rate of customer satisfaction was 97.6%. In order to improve the overall appearance of the service areas, the Company carried out improvements on spatial arrangement and upgraded hardware equipment for some service areas under its management during the reporting period. The Company carried out a questionnaire survey in respect to customer demand and consumer trend, after which new foods and beverages including fast foods and local specialty snacks were introduced to meet customers' needs. The Company made contribution to public liability insurance in order to cover the losses incurred by its customers from accidental injuries within the service areas. The Company was awarded as one of the ten best contenders in the "The First Session of Outstanding Management Company of Highway Service Areas in China". The Company was assessed and selected by the China Highway and Transportation Society among more than 200 competitors in China, and reviewed by competent authorities including the Zhejiang Provincial Communication Department. Jiaxing service area, Shaoxing service area, Yuyao service Area and Chang'an service area were awarded as four-star service areas, and Shengzhou service area, Xinchang service area and Tiantai service area were awarded as three-star service areas. During the reporting period, the Company performed 31,473 roadside assistances. From receiving a request for roadside assistance to dispatch of rescue team, the average response time required was approximately 5 minutes. During the reporting period, the Company has not been involved in any intellectual property litigation or any proceedings in relation to customer privacy leakage, nor has there been any food safety incident in its service areas. (3) External Liabilities Due to the inherent characteristics of our products and services, such as highway traffic noises and occasional spillage of dangerous goods on the roads, there are inevitably some impacts to the social environment and the daily lives of the residents along the roads. In this respect, the Company, through consultation with the government and residents, has installed soundproofed glasses in the affected residential units, and planted trees on roadsides to mitigate the noise nuisance caused to the residents. The Company has taken a series of measures to reduce or eliminate spillage of dangerous goods on the roads, including registration of vehicles carrying dangerous goods at the entrances, placement of warning signs, upgrading accident-prone road sections, formulation of internal emergency response plans, assisting local governments along the highways in preparation of contingency plans, and organizing emergency drills to shorten response time and improve handling capacity. During the reporting period, there were a total of 3 incidents of dangerous goods spillage along the Shanghai- Hangzhou-Ningbo Expressway, Shangsan Expressway and Ningbo-Jinhua Expressway. The Company properly handled the incidents through active cooperation with the safety production supervision authorities and government environmental agencies and acted according to their requirements. No incident of dangerous goods spillage occurred due to the Company's fault. (4) Anti-corruption All of the Company's staff are familiar with the legal liabilities in respect to corruption. In order to strengthen its internal anti-corruption and anti-bribery monitoring work. The Company has established an internal monitoring unit—discipline inspection and supervision office, and each frontline station is manned with part-time discipline inspection and liaison personnel. The Company fortifies the responsibility of leaders and employees at all levels in fighting against corruption by way of signing a "letter of responsibility against corruption". Anti-corruption education activities such as "performance evaluation and integrity evaluation", "watching anti-corruption education videos", "visiting police education bases" and holding "anti-corruption business reporting seminars" are carried out. During the reporting period, there was no major illegal case in relation to corruption. 4. Community Involvement (1) Investment in Community The Company particpates in the establishment of civilized units and is enthusiastic about public welfare activities in the community. In particular, it actively engages in helping the distressed people by providing material, mental and capability enhancement assistances, with an aim to uplift the civil qualities of the villagers in targeted villages, promote moral and ethical education, enrich their business and cultural lives, improve their living environment and quality of life, and to care for the left-behind children. During the reporting period, the Company cooperated with 20 institutions in giving assistance and sharing of cultural life with identified parties, helped 21 poor children to continue with their school, giving assistance amounting in total to RMB279,000. (2) Volunteer Programme Volunteer programme is an important vehicle through which our staff contributes to society. It is also a cultural value which the Company advocates. A number of volunteer service teams are formed to carry out volunteer activities in various forms and with different contents which take place during festive occasions and holidays. These include emergency rescues, traffic directions, services for the convenience of people, unpaid blood donations and driving safety initiatives. During the reporting period, the Company organized 129 volunteer activities in which a total of 1,235 employees participated, and 58 employees engaged in blood donations. (3) Donation The Company supports the development of cultural and sports activities in Zhejiang Province and has entered into a donation agreement with Zhejiang Sports Bureau, pursuant to which the Company donates RMB1,000,000 every year to Zhejiang College of Sports (three years in total) for the funding of teaching, scientific research and talent development. In response to the call of Zhejiang Provincial government, all employees took the initiative to contribute a total of RMB143,000 to support the Zhejiang Provincial government in the development and implementation of aquatic improvement projects for the enhancement of people's living environment throughout the province. (This environmental and social responsibility report of 2014 was approved by the Board on 27 August 2014.) Executive Directors Authorized Representatives ZHAN Xiaozhang (Chairman) ZHAN Xiaozhang LUO Jianhu (General Manager) ZHANG Jingzhong DING Huikang Statutory Address Non-Executive Directors 12/F, Block A, Dragon Century Plaza 1 Hangda Road Hangzhou City, Zhejiang Province PRC 310007 LI Zongsheng Tel : 86-571-8798 5588 WANG Weili Fax: 86-571-8798 5599 WANG Dongjie Independent Non-Executive Directors ZHANG Junsheng Legal Advisers ZHOU Jun PEI Ker-Wei As to Hong Kong and US law: Herbert Smith Freehills 23rd Floor, Gloucester Tower Supervisors 15 Queen’s Road Central Hong Kong FU Zhexiang WU Yongmin LIU Haisheng (Resigned on 8 April, 2014) As to English law: ZHANG Guohua Herbert Smith Freehills LLP ZHANG Xiahua Exchange House Primrose Street London EC2A 2EG Company Secretary United Kingdom Tony Zheng As to PRC law: T & C Law Firm 11/F, Block A, Dragon Century Plaza 1 Hangda Road Hangzhou City, Zhejiang Province PRC 310007 Corporate Information Auditors H Shares Listing Information Deloitte Touche Tohmatsu The Stock Exchange of Hong Kong Limited 35/F, One Pacific Place Code: 0576 88 Queensway Hong Kong London Stock Exchange Plc Investor Relations Consultant Code: ZHEH PR Concpets Asia Limited ADRs Information 16/F., Methodist House 36 Hennessy Road, Wanchai US Exchange: OTC Hong Kong Symbol: ZHEXY Tel: 852-2117 0861 CUSIP: 98951A100 Fax: 852-2117 0869 ADR: H Shares 1:10 Principal Bankers Representative Office in Hong Kong Industrial and Commercial Bank of China, Suite 2910 Zhejiang Branch 29/F, Bank of America Tower Shanghai Pudong Development Bank, 12 Harcourt Road Hangzhou Branch Hong Kong Tel : 852-2537 4295 Fax: 852-2537 4293 H Share Registrar and Transfer Office Hong Kong Registrars Limited Website Room 1712-1716, 17/F, Hopewell Centre 183 Queen's Road East www.zjec.com.cn Hong Kong ----------------------------------------------------------------------------------------------- NOTE : To view the full set of the Company's 2014 Interim Report. Please visit www.zjec.com.cn -----------------------------------------------------------------------------------------------

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