This Circular Is Important and Requires Your Immediate Attention

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountants or other professional adviser. If you have sold or transferred all your shares in Zhejiang Expressway Co., Ltd., you should at once hand this circular with the accompanying form of proxy to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee. Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

(A joint stock limited company incorporated in the People’s Republic of China with limited liability) (Stock Code: 0576)

DISCLOSEABLE AND CONNECTED TRANSACTIONS IN RELATION TO ACQUISITION OF AN AGGREGATE 76.55% EQUITY INTEREST IN ZHEJIANG JINHUA YONGJIN EXPRESSWAY CO., LTD. AND PROPOSED ISSUE OF DOMESTIC CORPORATE BONDS IN THE PRC AND NOTICE OF 2012 ANNUAL GENERAL MEETING

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders of Zhejiang Expressway Co., Ltd.

A letter from the Board is set out on pages 7 to 26 of this circular. A letter from the Independent Board Committee is set out on page 27 of this circular. A letter from ABCI Capital Limited, the Independent Financial Adviser, containing its recommendations to the Independent Board Committee and the Independent Shareholders is set out on pages 28 to 42 of this circular. A notice for convening the 2012 annual general meeting (the “AGM”) of the Company to be held at 3 p.m. on Friday, 21 June 2013 at 12/F, Block A, Dragon Century Plaza, 1 Hangda Road, Hangzhou, Zhejiang Province, the People’s Republic of China is set out on pages 118 to 123 of this circular. A form of proxy for use at the AGM is enclosed. Whether or not you are able to attend the meeting in person, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon. In case of H Shares, the proxy form shall be lodged with the Company’s H Shares Registrar, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, not less than 24 hours before the time for holding the AGM (or any adjournment thereof). Completion and delivery of the form of proxy will not preclude you from attending and voting in person at the AGM or any adjournment thereof should you so wish.

7 May 2013 CONTENTS

Page

Definitions ...... 1

Letter from the Board ...... 7

Letter from the Independent Board Committee ...... 27

Letter from ABCI Capital Limited ...... 28

Appendix I – Valuation Report ...... 43

Appendix II – Traffic Study Report ...... 78

Appendix III – Letters Relating to Discounted Future Estimated Cash Flows ...... 110

Appendix IV – General Information ...... 113

Notice of AGM ...... 118 DEFINITIONS

In this circular, unless the context specifies otherwise, the following expressions shall have the meanings stated below:

“AGM” the 2012 annual general meeting of the Shareholders of the Company to be convened for the purposes of, among other things, the approval by the Independent Shareholders of the Acquisitions, the notice of which is set out on pages 118 to 123 of this Circular

“Acquisitions” the proposed acquisitions by the Company of a 66.283% and a 10.267% equity interest in the Target Company from Communications Group and Yiwu Development, respectively, pursuant to the Acquisition Agreements

“Acquisition Agreements” the Communications Group Agreement and the Yiwu Agreement

“Ancillary Agreements” the Maintenance Work Agreement, the Service Area Operation Agreement, the Service Area Utilities Services Agreement and the Road Clearance and Emergency Service Agreement

“Articles of Association” the articles of association of the Company

“associate(s)” has the meaning ascribed to it under the Listing Rules

“Board” the Board of Directors

“business day” any day, other than a Saturday or Sunday or a public holiday in the PRC, on which banks are generally open for business in the PRC

“Circular” this circular to the Shareholders

“Communications Group” 浙江省交通投資集團有限公司 (Zhejiang Communications Investment Group Co., Ltd.), a wholly State-owned enterprise established in the PRC, and the controlling shareholder of the Company

“Communications Group Acquisition” the proposed sale and purchase of a 66.283% equity interest in the Target Company pursuant to the Communications Group Agreement

“Communications Group the agreement dated 20 March 2013 entered into between the Agreement” Company and Communications Group, pursuant to which the Company conditionally agreed to purchase from Communications Group a 66.283% equity interest in the Target Company

1 DEFINITIONS

“Company” or “Zhejiang Zhejiang Expressway Co., Ltd. (浙江滬杭甬高速公路股份有限 Expressway” 公司), a joint stock limited company incorporated in the PRC with limited liability

“Company Law” the Company Law of the PRC

“Completion” completion of the Acquisition Agreements, or either of them (as the context may require) in accordance with their respective terms

“connected person(s)” has the meaning ascribed to it under the Listing Rules

“controlling shareholder” has the meaning ascribed to it under the Listing Rules

“Credit Agreement” the agreement dated 8 March 2013 entered into between the Target Company and Zhejiang Communications Finance, pursuant to which Zhejiang Communications Finance provided to the Target Company a loan for the maximum amount of RMB70,000,000 during the term of the agreement

“CSRC” China Securities Regulatory Commission (中國證券監督管理委員會) of the PRC

“Deloitte” Deloitte Touche Tohmatsu, the auditors of the Company

“Director(s)” the director(s) of the Company

“Domestic Corporate Bonds” domestic corporate bonds in the principal amount of up to RMB1 billion proposed to be issued by the Company in the PRC

“Dongyang Service Area” the Dongyang service area of the Ningbo-Jinhua Expressway

“Group” the Company and its subsidiaries

“H Shares” overseas listed foreign shares in the share capital of the Company with a nominal value of RMB1 per share, which are listed on the Main Board of the Stock Exchange

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

“HK$” Hong Kong dollars, the lawful currency of Hong Kong

“Independent Board Committee” an independent committee of the Board comprising all independent non-executive Directors, namely, Mr. Zhang Junsheng, Mr. Zhou Jun and Mr. Pei Ker-Wei

2 DEFINITIONS

“Independent Financial Adviser” ABCI Capital Limited, a licensed corporation licensed to conduct type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO and the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Acquisitions

“Independent Shareholders” Shareholders who are independent within the meaning of the relevant provisions of the Listing Rules, and, in relation to the approval of the Acquisitions at the AGM, means the Shareholders other than Communications Group and its associates

“Independent Third Party” a party independent and not connected with the Company, any of its subsidiaries or any of their respective directors or substantial shareholders

“Jinhua Jinyong Investments” 金華市金甬高速公路建設投資有限公司 (Zhejiang Jinhua Jinyong Expressway Construction Investments Co., Ltd.), a limited liability company incorporated in the PRC and the predecessor of the Target Company

“Jinhua Section of the the Jinhua section of the Ningbo-Jinhua Expressway, starting from Ningbo-Jinhua Expressway” the Baifengling Tunnel between Chengzhou City and Dongyang City and ending at Hongtangfan, Fucun Town, Jindong District, Jinhua City with a total length of approximately 69.7 km

“Jones Lang LaSalle” Jones Lang LaSalle Corporate and Appraisal Advisory Limited, an independent valuer appointed by the Company

“Listing Rules” Rules Governing the Listing of Securities on the Stock Exchange

“Latest Practicable Date” 3 May 2013, being the latest practicable date for ascertaining certain information contained in this Circular

“Loans” two loans of a maximum amount of RMB170,000,000 each granted by Communications Group and Zhejiang Communications Finance to the Target Company pursuant to the Loan Agreements, and one loan of a maximum amount of RMB70,000,000 granted by Zhejiang Communications Finance to the Target Company pursuant to the Credit Agreement

“Loan Agreements” two agreements both dated 28 February 2013 entered into among the Target Company, Communications Group and Zhejiang Communications Finance with the same terms, pursuant to which Communications Group entrusted Zhejiang Communications Finance to provide to the Target Company a loan for the maximum amount of RMB170,000,000 under each agreement during the term of the agreement 3 DEFINITIONS

“Maintenance Work Agreement” the agreement dated 28 December 2012 entered into between the Target Company and Zhejiang Shunchang in connection with the provision of certain maintenance work in respect of the Jinhua Section of the Ningbo-Jinhua Expressway to the Target Company

“New Ancillary Agreements” the New Service Area Operation Agreement and the New Service Area Utilities Services Agreement

“New Service Area Operation the agreement to be entered into between the Target Company Agreement” and Zhejiang Communications Investment upon completion of the Communications Group Agreement, in connection with the operation in the Dongyang Service Area, including, the provision of, among other things, petrol station services, catering services, supermarket services, vehicle repair services

“New Service Area Utilities the agreement to be entered into between the Target Company Services Agreement” and Zhejiang Communications Investment upon completion of the Communications Group Agreement, in connection with the provision of utilities facilities and services in the Dongyang Service Area such as car park, washroom, lounge area

“Ningbo-Jinhua Expressway” the expressway (No. G1512) connecting Ningbo City, Shaoxing or “Project Expressway” City and Jinhua City of Zhejiang Province with a total length of 185 km

“percentage ratio” has the meaning ascribed to it under Rule 14.04(9) of the Listing Rules

“PRC” the People’s Republic of China (for the purpose of this Circular, excludes Hong Kong, Macau and Taiwan)

“PRC Domestic Valuer” the PRC qualified domestic valuer appointed by the Communications Group

“PRC Valuation Report” the valuation report prepared by the PRC Domestic Valuer and commissioned by the Communications Group in respect of the Target Company

“RMB” Renminbi, the lawful currency of the PRC

“Road Clearance and Emergency the agreement dated 15 December 2011 entered into between the Service Agreement” Target Company and Zhejiang Communications Hangjinqu Jinhua Management Office, in connection with the provision of certain road clearance and emergency service in respect of the Jinhua Section of the Ningbo-Jinhua Expressway to the Target Company

4 DEFINITIONS

“Securities Law” the Securities Law of the PRC

“Service Area Operation Agreement” the agreement dated 30 December 2010 entered into between the Target Company and Zhejiang Communications Investment, in connection with the operation in the Dongyang Service Area, including, the provision of, among other things, petrol station services, catering services, supermarket services, vehicle repair services

“Service Area Utilities the agreement dated 30 December 2010 entered into between the Services Agreement” Target Company and Zhejiang Communications Investment, in connection with the provision of utilities facilities and services in the Dongyang Service Area such as car park, washroom, lounge area

“SFO” Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

“Shareholder(s)” holder(s) of the share(s) of the Company

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“subsidiary(ies)” has the meaning ascribed to it under the Listing Rules

“Target Company” or 浙江金華甬金高速公路有限公司 (Zhejiang Jinhua Yongjin “Jinhua Yongjin’ Expressway Co., Ltd.), a limited liability company incorporated in the PRC and owned as to 66.283%, 23.45% and 10.267% by Communications Group, the Company and Yiwu Development respectively

“Tentative Methods” the Tentative Methods on Issue of Corporate Bonds (公司債券發行試點辦法) promulgated by the CSRC

“Traffic Study Report” the traffic and toll revenue forecasts report dated March 2013 prepared by Wilbur Smith in respect of the traffic and toll revenue study of the Jinhua Section of the Ningbo-Jinhua Expressway

“Valuation Date” 30 September 2012, the valuation date adopted in the Valuation Report

“Valuation Report” the valuation report dated 19 March 2013 prepared by Jones Lang LaSalle and commissioned by the Company in respect of the Target Company

“Wilbur Smith” or “consulting firm” Wilbur Smith Associates, an independent traffic consultant appointed by the Company

5 DEFINITIONS

“Yiwu Acquisition” the proposed sale and purchase of a 10.267% equity interest in the Target Company pursuant to the Yiwu Agreement

“Yiwu Agreement” the agreement dated 20 March 2013 entered into between the Company and Yiwu Development, pursuant to which the Company has conditionally agreed to purchase from Yiwu Development a 10.267% equity interest in the Target Company

“Yiwu Development” 義烏市交通發展有限責任公司 (Yiwu Communications Development Co., Ltd.), a limited liability company incorporated in the PRC and an Independent Third Party

“Yiwu Investments” 義烏市國有資產投資控股有限公司 (Yiwu State-owned Assets Investments Holdings Co., Ltd.), a limited liability company incorporated in the PRC and the predecessor of Yiwu Operations

“Yiwu Operations” 義烏市國有資產經營有限公司 (Yiwu State-owned Assets Operations Co., Ltd.), a limited liability company incorporated in the PRC and an Independent Third Party

“Zhejiang Communications 浙江省交通投資集團財務有限責任公司 (Zhejiang Communications Finance” Investment Group Finance Co., Ltd.), a 60% owned subsidiary of the Communications Group

“Zhejiang Communications 浙江省交通投資集團有限公司杭金衢分公司金華管理處 Hangjinqu Jinhua (Zhejiang Communications Investment Group Co., Ltd. Hangjinqu Management Office” Branch Jinhua Management Office), the Jinhua Management Office of the Hangjinqu Branch of Communications Group

“Zhejiang Communications 浙江省交通投資集團實業發展有限公司 (Zhejiang Communications Investment” Investment Group Industrial Development Co., Ltd.) a company incorporated in the PRC and a wholly-owned subsidiary of Communications Group

“Zhejiang SASAC” State-owned Assets Supervision and Administration Commission of the People’s Government of Zhejiang Province of the PRC (中國浙江省人民政府國有資產監督管理委員會)

“Zhejiang Shunchang” 浙江順暢高等級公路養護有限公司 (Zhejiang Shunchang High-grade Expressway Maintenance Co., Ltd.), a company incorporated in the PRC and an indirectly-owned subsidiary of Communications Group

“%” per cent.

In this Circular, the translation of RMB into HK$ is based on the exchange of rate of HK$1 to RMB0.81. Such conversion shall not be construed as a representation that amounts in RMB were or may have been converted into HK$ using such exchange rate or any other exchange rate or at all.

6 LETTER FROM THE BOARD

(A joint stock limited company incorporated in the People’s Republic of China with limited liability) (Stock Code: 0576)

Executive Directors: Registered office in the PRC: Mr. Zhan Xiaozhang (Chairman) 12th Floor, Block A Ms. Luo Jianhu Dragon Century Plaza Mr. Ding Huikang 1 Hangda Road Hangzhou Non-executive Directors: Zhejiang Province 310007 Mr. Li Zongsheng The People’s Republic of China Mr. Wang Weili Mr. Wang Dongjie

Independent Non-executive Directors: Mr. Zhang Junsheng Mr. Zhou Jun Mr. Pei Ker-wei

7 May 2013

To the Shareholders

Dear Sir or Madam,

1. INTRODUCTION

On 20 March 2013, the Board announced that the Company entered into the Communications Group Agreement with Communications Group pursuant to which the Company conditionally agreed to purchase from Communications Group a 66.283% equity interest in the Target Company held by Communications Group at a cash consideration of RMB655,356,327 (equivalent to approximately HK$809,081,885), and the Yiwu Agreement with Yiwu Development pursuant to which the Company conditionally agreed to purchase from Yiwu Development a 10.267% equity interest in the Target Company held by Yiwu Development at a cash consideration of RMB101,512,354 (equivalent to approximately HK$125,323,894).

7 LETTER FROM THE BOARD

As at the Latest Practicable Date, Communications Group holds approximately 67% of the issued share capital of the Company. By virtue of this shareholding interest, Communications Group is a substantial shareholder (as defined in the Listing Rules) of the Company. Therefore, Communications Group is a connected person of the Company and as a result, the Communications Group Agreement constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules. Under the terms of the Yiwu Agreement, completion of the Yiwu Agreement is conditional upon, among other things, the prior completion of the Communications Group Agreement (but not vice versa). Accordingly, although Yiwu Development is an Independent Third Party, Yiwu Development is also treated as a connected person of the Company and the Yiwu Agreement also constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules. As the relevant percentage ratio for the Acquisitions is over 5% but less than 25% (with the consideration under the Acquisitions Agreements being, whether individually or in aggregate, more than HK$10,000,000), the Acquisitions also constitute discloseable transactions for the Company under Chapter 14 of the Listing Rules.

On the above basis, the Acquisitions are subject to the reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules applicable to connected transactions, and the reporting and announcement requirements under Chapter 14 of the Listing Rules applicable to discloseable transactions.

As at the Latest Practicable Date, the Target Company is a party to each of the Ancillary Agreements. Upon completion of the Communications Group Agreement, the Target Company will enter into the New Ancillary Agreements in replacement of the respective existing Ancillary Agreements (other than the Maintenance Work Agreement which will continue and the Road Clearance and Emergency Service Agreement which will terminate). By virtue of the counterparties of each of the New Ancillary Agreements and the Maintenance Work Agreement being subsidiaries (and hence associates) of Communications Group, the New Ancillary Agreements and the Maintenance Work Agreement will each constitute a continuing connected transaction for the Company under Chapter 14A of the Listing Rules. As each of the applicable percentage ratios under the Listing Rules for the New Ancillary Agreements and the Maintenance Work Agreement, individually or in aggregate, is less than 0.1%, such transactions are exempt from the reporting, announcement, annual review and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

Upon completion of the Acquisitions, the Target Company will become a wholly-owned subsidiary of the Company and the Loan Agreements and the Credit Agreement will constitute a connected transaction for the Company under Chapter 14A of the Listing Rules. As the Loan Agreements and the Credit Agreement will constitute financial assistance provided by a connected person for the benefit of a wholly-owned subsidiary of the Company on normal commercial terms where no security over the assets of the Target Company is granted in respect of the Loan Agreements or the Credit Agreement, the transactions thereunder are exempt from the reporting, announcement, annual review and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

8 LETTER FROM THE BOARD

An Independent Board Committee has been formed to consider the Acquisitions, and ABCI Capital Limited has been appointed as the Company’s Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders as to whether the terms of the Acquisitions are fair and reasonable and whether the Acquisitions are in the interests of the Company and the Shareholders as a whole.

On 20 March 2013, the Board further announced that on 19 March 2013, the Board approved a proposal to submit to the Shareholders at the AGM for consideration and approval of a proposed offer and issue of Domestic Corporate Bonds in the PRC with an aggregate principal amount of up to RMB1 billion for general working capital purposes.

The purpose of this Circular is to provide, among other things, further information about the Acquisitions and the Acquisition Agreements, the New Ancillary Agreements and the Maintenance Work Agreement, the Loan Agreements and the Credit Agreement, the proposed issue of Domestic Corporate Bonds, letters from the Independent Board Committee and the Independent Financial Adviser, a notice of AGM and other information as required under the Listing Rules.

2. DISCLOSEABLE AND CONNECTED TRANSACTIONS

(1) Communications Group Agreement

Date

20 March 2013

Parties

Vendor: Communications Group

Purchaser: The Company

Target interest to be acquired

66.283% equity interest in the Target Company

Consideration and payment terms

The consideration for the 66.283% equity interest in the Target Company is RMB655,356,327 (equivalent to approximately HK$809,081,885), and will be payable by the Company in cash within 5 business days after the effective date of the Communications Group Agreement.

9 LETTER FROM THE BOARD

Consideration adjustment

The consideration payable by the Company under the Communications Group Agreement was determined on the assumption that the toll collection rights period of the Ningbo-Jinhua Expressway as finally approved will be 25 years. As at the date of the Communications Group Agreement and the Latest Practicable Date, the toll collection rights period of the Ningbo-Jinhua Expressway is pending final approval by the relevant PRC governmental authorities. It is expected that such approval will be granted before 31 December 2013 and in the event that the toll collection rights period of the Ningbo-Jinhua Expressway as finally approved is different from 25 years, Communications Group and the Company have agreed to enter into a supplemental agreement to adjust downward the consideration with reference to the valuation of the Target Company to be carried out by the PRC Domestic Valuer (please see paragraph (3) “Basis of consideration” below) taking into account the difference of the toll collection rights period. In the event that the consideration under the Communications Group Agreement is so adjusted, the Company will comply in due course with such reporting, announcement and independent shareholders’ approval requirements under Chapters 14 and 14A of the Listing Rules as may be applicable.

Conditions precedent

Completion of the Communications Group Agreement is conditional upon:

(i) approval of the Communications Group Agreement by the Board and the board of directors of Communications Group having been obtained;

(ii) approval by the Company’s Independent Shareholders of the Communications Group Acquisition having been obtained in accordance with the Listing Rules; and

(iii) approval of the Zhejiang SASAC having been obtained in connection with the Communications Group Agreement.

Completion of the Communications Group Agreement is not conditional upon the completion of the Yiwu Agreement.

If any of the above conditions shall not have been fulfilled on or before 31 December 2013, either party is entitled to terminate the Communications Group Agreement by giving written notice to the other party.

As at the Latest Practicable Date, the condition under paragraph (i) above has been satisfied and the Company is not entitled to to waive any of above conditions under the Communications Group Agreement.

10 LETTER FROM THE BOARD

Effective date

The Communications Group Agreement will become effective upon satisfaction of all the conditions mentioned under “Conditions precedent” above. The parties have agreed, however, that if at any time after the Communications Group Agreement becomes effective any relevant PRC governmental department with authority over the agreement seeks to revoke such agreement so as to render performance of the Communications Group Agreement impossible, the parties will terminate the Communications Group Agreement and Communications Group will be required to repay all amounts already paid by the Company under this agreement together with interest at the prevailing bank lending interest rate promulgated by the People’s Bank of China for the same period.

Capital injection

The parties have agreed under the Communications Group Agreement that, within 120 days after the completion of the Communications Group Agreement, the Company will inject additional capital into the Target Company so that the Target Company can fully repay the Loans granted by Communications Group and Zhejiang Communications Finance to the Target Company. The Communications Group Agreement does not expressly stipulate the amount of capital injection but based on its own estimate, the Company plans to make a capital injection of up to RMB1,400,000,000 into the Target Company so that the Target Company will apply such capital to fully repay its interest-bearing loans (including, but not limited to, the Loans under the Loan Agreements and the Credit Agreement to the Communications Group). The Company plans to use its internal resources to fund such capital injection.

New Ancillary Agreements

The parties have agreed that, upon completion of the Communications Group Agreement, the Target Company shall enter into the New Ancillary Agreements which shall replace and supersede the existing Ancillary Agreements (other than the Maintenance Work Agreement which will continue and the Road Clearance and Emergency Service Agreement which will terminate).

Governing law

The laws of the PRC

11 LETTER FROM THE BOARD

(2) Yiwu Agreement

Date

20 March 2013

Parties

Vendor: Yiwu Development

Purchaser: The Company

Target interest to be acquired

10.267% equity interest in the Target Company

Consideration and payment terms

The consideration for the 10.267% equity interest in the Target Company is RMB101,512,354 (equivalent to approximately HK$125,323,894), and will be payable by the Company in cash within 5 business days after the effective date of the Yiwu Agreement.

Consideration adjustment

The consideration payable by the Company under the Yiwu Agreement was determined on the assumption that the toll collection rights period of the Ningbo-Jinhua Expressway as finally approved will be 25 years. As at the date of the Yiwu Agreement and the Latest Practicable Date, the toll collection rights period of the Ningbo-Jinhua Expressway is pending final approval by the relevant PRC governmental authorities. It is expected that such approval will be granted before 31 December 2013 and in the event that the toll collection rights period of the Ningbo-Jinhua Expressway as finally approved is different from 25 years, Yiwu Development and the Company have agreed to enter into a supplemental agreement to adjust downward the consideration with reference to the valuation of the Target Company to be carried out by the PRC Domestic Valuer (please see paragraph (3) “Basis of consideration” below) taking into account the difference of the toll collection rights period. In the event that the consideration under the Yiwu Agreement is so adjusted, the Company will comply in due course with such reporting, announcement and independent shareholders’ approval requirements under Chapters 14 and 14A of the Listing Rules as may be applicable.

Conditions precedent

Completion of the Yiwu Agreement is conditional upon:

(i) the Communications Group Agreement becoming unconditional in accordance with its terms and its prior completion;

12 LETTER FROM THE BOARD

(ii) approval of the Yiwu Agreement by both the Board and the board of directors of Yiwu Development having been obtained;

(iii) approval by the Company’s Independent Shareholders of the Yiwu Acquisition having been obtained in accordance with the Listing Rules and approval of the Yiwu Acquisition by the shareholders of Yiwu Development; and

(iv) approval of the Zhejiang SASAC having been obtained in connection with the Yiwu Agreement.

If any of the above conditions shall not have been fulfilled on or before 31 December 2013, either party is entitled to terminate the Yiwu Agreement by giving written notice to the other party.

As at the Latest Practicable Date, the condition under paragraph (ii) above has been satisfied and the Company is not entitled to waive any of above conditions under the Yiwu Agreement.

Effective date

The Yiwu Agreement will become effective upon satisfaction of all the conditions mentioned under “Conditions precedent” above. The parties have agreed, however, that if at any time after the Yiwu Agreement becomes effective any relevant PRC governmental department with authority over the agreement seeks to revoke such agreement so as to render performance of the Yiwu Agreement impossible, the parties will terminate the Yiwu Agreement and Yiwu Development will be required to repay all amounts already paid by the Company under this agreement together with interest at the prevailing bank lending interest rate promulgated by the People’s Bank of China for the same period.

Governing law

The laws of the PRC

(3) Basis of consideration

The consideration of RMB655,356,327 (equivalent to approximately HK$809,081,885) under the Communications Group Agreement and RMB101,512,354 (equivalent to approximately HK$125,323,894) under the Yiwu Agreement were determined based on arm’s length negotiations between the Company and Communications Group and Yiwu Development, respectively.

A number of factors were considered by the parties when determining the consideration of the Communications Group Agreement and the Yiwu Agreement, including, amongst others, the Valuation Report prepared by Jones Lang LaSalle, as well as the PRC Valuation Report prepared by the PRC Domestic Valuer and commissioned by the Communications Group pursuant to the requirements of Zhejiang SASAC and relevant PRC laws and regulations.

13 LETTER FROM THE BOARD

The Company relied on the Valuation Report when determining the consideration under the Acquisition Agreements, pursuant to which the appraised value of the entire equity interest of the Target Company as at 30 September 2012 was RMB1,026,000,000. The Communications Group relied instead on the PRC Valuation Report when determining the consideration under the Communications Group Agreement, pursuant to which the appraised value of the entire equity interest of the Target Company as at 30 September 2012 was RMB988,700,000. The Company did not appoint the PRC Domestic Valuer, nor was the Company involved in the preparation of the PRC Valuation Report. The Company and Communications Group and Yiwu Development then agreed on the final consideration payable under the Acquisition Agreements following arm’s length negotiations.

The Acquisitions constitute a transfer of State-owned assets in the PRC and therefore require the approval by the Zhejiang SASAC in accordance with the relevant PRC laws and regulations. As at the Latest Practicable Date, the PRC Valuation Report commissioned by the Communications Group has been submitted to Zhejiang SASAC for registration.

(4) Principal assumptions for the income approach adopted for the Valuation Report

The appraised value of the entire equity interest of the Target Company under the Valuation Report was prepared using the income approach based on the discounted cash flow method. As a result, such valuation constitutes a profit forecast under Rule 14.61 of the Listing Rules. Therefore, this Circular is subject to the requirements under Rules 14.60A and 14.62 of the Listing Rules in relation to profit forecast.

As required under Rule 14.62(1) of the Listing Rules, details of the key assumptions used in determining the value of the entire equity interest in the Target Company upon which the Valuation Report was issued are set out below:

• The projected business of the Target Company can be achieved with the effort of the management of the Company.

• In order to realise the growth potential of the business of the Target Company and maintain a competitive edge, additional manpower, equipment and facilities are necessary to be employed and that the facilities and systems of the Target Company are sufficient for future expansion.

• There will be no material change in the existing political, legal, technological, fiscal or economic conditions, which might adversely affect the business of the Target Company.

• The operational and contractual terms stipulated in the relevant contracts and agreements of the Target Company will be honoured.

• Copies of the operating licences and company incorporation documents provided to Jones Lang LaSalle by the Target Company are reliable and legitimate.

14 LETTER FROM THE BOARD

• Natural weather can have an impact on toll roads, including flooding and other types of extreme weather, which may force toll roads to close, and that no extended closure will occur to the toll roads managed by the Target Company.

• The accuracy of the financial and operational information provided to Jones Lang LaSalle by the Target Company.

• Share capital injections and shareholder’s loans will be made to the Target Company when necessary.

• Additional working capital requirement is minimal.

• The effective income tax rate is assumed to be 25% and the Target Company is assumed to start paying tax from 2017.

• Interest expenses are calculated based on the long term borrowing rate of the loan agreements of the Target Company.

• The following assumptions in connection with depreciation were adopted:

(i) Road and Structures: traffic volume method, depreciation period of 25 years, residual value of 0%;

(ii) Buildings and Structures: unit-of-usage method, depreciation period of 26 years, residual value of 5%;

(iii) Special Equipments: unit-of-usage method, depreciation period of 10 years, residual value of 5%;

(iv) Transportation Facilities: unit-of-usage method, depreciation period of 8 years, residual value of 5%; and

(v) General Facilities: unit-of-usage method, depreciation period of 5 years, residual value of 5%.

• Cost of goods sold was forecasted based on the historical average of principal business costs related to the maintenance of road, including operating cost, road maintenance cost, system maintenance cost and other related costs provided by Jinhua Yongjin. Each component of the cost of goods sold was projected to be a declining percentage of Jinhua Yongjin’s annual revenue based on the assumption that Jinhua Yongjin’s revenue will increase while the monetary amount of each component of the cost of goods sold will remain relatively stable.

15 LETTER FROM THE BOARD

• Total operating expenses include selling expenses and administrative expenses (which include employee, administration, and depreciation and amortization fees). Based on the historical information provided by the management of Jinhua Yongjin in relation to Jinhua Yongjin’s operating expenses, the selling expenses was forecasted to be zero, and the administrative expenses was forecasted to be 2% of Jinhua Yongjin’s annual revenue from 2012 to 2016 and 1% of Jinhua Yongjin’s annual revenue from 2017 to 2030.

Deloitte, acting as the reporting accountants of the Company, has examined the calculations of the discounted future estimated cash flows in which the Valuation Report is based, which do not involve the adoption of accounting policies in its preparation.

The Directors confirm that the valuation of the entire equity interest of the Target Company in the Valuation Report, which constitutes a profit forecast under Rule 14.61 of the Listing Rules, has been made after due and careful enquiry.

Based on the opinion of Jones Lang LaSalle, the Directors consider that the assumptions used in determining the value of the entire equity interest in the Target Company upon which the Valuation Report was issued are fair and reasonable.

A letter from Deloitte in compliance with Rule 14.62(2) of the Listing Rules and a letter from the Board in compliance with Rule 14.62(3) of the Listing Rules are included in Appendix III to this Circular.

To the best of the Directors’ knowledge, information and belief, Deloitte is an Independent Third Party.

(5) Original cost of the 66.283% and the 10.267% equity interest in the Target Company to Communications Group and Yiwu Development respectively

Upon establishment of Jinhua Jinyong Investments (the predecessor of the Target Company) in February 2002, its registered capital was RMB200,000,000.

In September 2002, Communications Group acquired a 58.33% equity interest in Jinhua Jinyong Investments by contributing RMB280,000,000 to the increased registered capital of Jinhua Jinyong Investments of RMB480,000,000. In September 2003, the name of Jinhua Jinyong Investments was changed to its present name. In September 2004, the Target Company’s registered capital was increased by RMB80,000,000 and, not having made any further capital contribution to the Target Company, the equity interest in the Target Company owned by Communications Group was consequently diluted to 50%. In April 2005, the Target Company’s registered capital was further increased to RMB800,000,000 and, not having made any further capital contribution to the Target Company, the equity interest in the Target Company owned by Communications Group was further diluted to 35%. In March 2007, the Company acquired 23.45% equity interest in the Target Company from two former shareholders of the Target Company at a total consideration of RMB281,400,000. In February 2009, Communications Group acquired a 30% equity interest in the Target

16 LETTER FROM THE BOARD

Company from a former shareholder of the Target Company at a consideration of RMB240,000,000. In June 2010, Communications Group acquired a 1.283% equity interest in the Target Company by contributing RMB7,655,000 to the increased registered capital of the Target Company of RMB900,000,000.

Upon establishment of Jinhua Jinyong Investments (the predecessor of the Target Company) in February 2002, Yiwu Investments (the predecessor of Yiwu Operations) acquired a 33% equity interest in Jinhua Jinyong Investments by contributing RMB66,000,000 to its registered capital. In September 2004, Yiwu Investments (the predecessor of Yiwu Operations) made a further capital contribution of RMB26,400,000 to the Target Company. In April 2009, the name of Yiwu Investments was changed to its present name and in the same year, Yiwu Operations transferred its capital contributions in the Target Company in the total amount of RMB92,400,000 to Yiwu Development. The registered capital of the Target Company was increased as described above and, not having made any further capital contribution to the Target Company, the equity interest in the Target Company owned by Yiwu Development was consequently diluted to 10.267%.

3. INFORMATION ON THE TARGET COMPANY

The Target Company is a limited liability company incorporated in the PRC on 8 February 2002 and with a registered capital of RMB900,000,000 as at the Latest Practicable Date. As at the Latest Practicable Date, the Target Company is owned as to 66.283%, 23.45% and 10.267% by Communications Group, the Company and Yiwu Development respectively.

The Target Company is principally engaged in the operation and management of the Jinhua Section of the Ningbo-Jinhua Expressway. The Ningbo-Jinhua Expressway is a branch line of the Shenyang- Haikou Expressway within the State expressway network linking the eastern and western parts of Zhejiang Province, connecting to Hangjinqu Expressway and Ningbo Loop Expressway. Jinhua Section of the Ningbo-Jinhua Expressway, under the Target Company’s operation, is a dual four-lane expressway located in Chengzhou City, Dongyang City, Yiwu City and Jinhua City of Zhejiang Province with a total length of approximately 69.7 km. As at the Latest Practicable Date, the toll collection rights period of the Ningbo-Jinhua Expressway has not been finally approved by the relevant governmental authorities and in accordance with the relevant expressway regulations in the PRC, the toll collection rights period of an expressway shall not be more than 25 years.

Based on information provided by the Target Company, in 2012, the Jinhua Section of the Ningbo- Jinhua Expressway recorded an average daily traffic volume of 12,084 in full-trip equivalents, while toll income amounted to RMB231,480,990 according to audited financials statements of the Target Company prepared in accordance with generally accepted accounting principles in the PRC by the PRC statutory auditor of the Target Company. Based on information provided by the Target Company, for the three months ended 31 March 2013, the Jinhua Section of the Ningbo-Jinhua Expressway recorded an average daily traffic volume of 14,244 in full-trip equivalents, while toll income amounted to RMB60,158,300, which represented increases of 15.08% and 9%, respectively, compared with the same period in 2012. The Board confirms that, as advised by Jones Lang LaSalle and Wilbur Smith respectively, there has not been any material change in the valuation of Jinhua Yongjin in the Valuation Report and the revenue forecast in the Traffic Study Report since the valuation date of the Valuation Report (i.e. 30 September 2012) and the forecast date of the Traffic Study Report (i.e. January 2013). 17 LETTER FROM THE BOARD

The net asset value of the Target Company based on its audited financial statements for the years ended 31 December 2011 and 2012 prepared in accordance with generally accepted accounting principles in the PRC by the PRC statutory auditor of the Target Company are set out below:

As at 31 December 2011 2012 RMB’000 RMB’000 (audited) (audited)

Net asset value 669,588 650,883

Based on the information provided by the Target Company, the Target Company has a high leverage ratio. As at 31 December 2012, the Target Company had interest bearing loans of approximately RMB1,400 million and its financing costs for the years ended 31 December 2011 and 2012 amounted to approximately RMB87.57 million and RMB 83.23 million, respectively. Due to its heavy financing costs, the Target Company incurred losses for the years ended 31 December 2011 and 2012. The net profit/ (loss) before and after tax and extraordinary items of the Target Company based on its audited financial statements for the years ended 31 December 2011 and 2012 prepared in accordance with generally accepted accounting principles in the PRC by the PRC statutory auditor of the Target Company are set out below:

For the year ended 31 December 2011 2012 RMB’000 RMB’000 (audited) (audited)

net profit/(loss) before tax and extraordinary items –28,108 –18,704 net profit/(loss) after tax and extraordinary items –28,108 –18,704

4. EFFECT OF THE ACQUISITIONS

Upon completion of both the Communications Group Acquisition and the Yiwu Acquisition, the Company will beneficially own the entire equity interest in the Target Company. In the event that only the Communications Group Acquisition is completed, the Company will beneficially own in aggregate 89.733% of the Target Company’s equity interest. In each case (assuming at least the Communications Group Acquisition is completed), the Target Company will become a subsidiary of the Company and the accounts of the Target Company will be consolidated into the accounts of the Company.

18 LETTER FROM THE BOARD

5. REASONS FOR AND BENEFITS OF THE ACQUISITIONS

After completion of the Acquisitions, the total length of expressways managed by the Company will increase from approximately 389.60 km to approximately 459.35 km. The main businesses of the Company will be enhanced through the Acquisitions which help to increase the market share and competitive strength of the Company in Zhejiang Province. The Jinhua Section of Ningbo-Jinhua expressway connects with the Shaoxing Section of Ningbo-Jinhua Expressway (which is managed by Shengxin Expressway Co., Ltd., in which the Company currently owns 50% equity interest), and crosses with the Shangsan Expressway managed by the Company. The Directors believe that the Acquisitions will facilitate the Company to better utilise its experience and advantages in toll operation and to complement the Company’s existing network of expressways, and are in line with the Company’s development strategy.

6. INFORMATION ON THE COMPANY, COMMUNICATIONS GROUP AND YIWU DEVELOPMENT

The Company is a joint stock company established under the laws of the PRC with limited liability on 1 March 1997, the H Shares of which are listed on the Main Board of the Stock Exchange. It is principally engaged in investing in, developing and operating high-grade roads in the PRC. The Group also carries on certain other businesses such as automobile servicing, operation of gas stations and billboard advertising along expressways, as well as securities related business.

Communications Group is a wholly State-owned enterprise established in the PRC on 29 December 2001 and is principally engaged in a diverse range of businesses, including investment, operations, maintenance, toll collection and ancillary services of expressways, construction and building of transportation project, ocean and coastal transport, as well as real estate.

Based on information provided by Yiwu Development to the Company, Yiwu Development is a limited liability company incorporated in the PRC in April 2009 and is principally engaged in the businesses of logistics, passenger and freight carriage, construction and development of roads as well as airport management. Yiwu Development is an Independent Third Party.

7. EXEMPT CONNECTED TRANSACTIONS AND NEW CONTINUING CONNECTED TRANSACTIONS

(1) New Continuing Connected Transactions

As at the Latest Practicable Date, the Target Company is a party to each of the Ancillary Agreements. Since the terms of the existing Ancillary Agreements (other than the Maintenance Work Agreement) do not conform with the requirements of Chapter 14A of the Listing Rules relating to continuing connected transactions, including that they must be on normal commercial terms, it is proposed that, upon completion of the Communications Group Agreement, the Road Clearance and Emergency Service Agreement will terminate and the Target Company will enter into the New Ancillary Agreements (which comply with the relevant Listing Rules requirements) to replace and supersede the existing Ancillary Agreements (other than the Maintenance Work Agreement which will continue and the

19 LETTER FROM THE BOARD

Road Clearance and Emergency Service Agreement which will terminate). By virtue of the counterparties of each of the New Ancillary Agreements and the Maintenance Work Agreement being subsidiaries (and hence associates) of Communications Group, the New Ancillary Agreements and the Maintenance Work Agreement would have each constituted a continuing connected transaction for the Company under Chapter 14A of the Listing Rules. As each of the applicable percentage ratios under the Listing Rules for the New Ancillary Agreements and the Maintenance Work Agreement, individually or in aggregate, is less than 0.1%, such transactions are exempt from the reporting, announcement, annual review and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

A brief description of the Maintenance Work Agreement and each New Ancillary Agreement is set out below:

Maintenance Work Agreement

As at the Latest Practicable Date, the Target Company is a party to the Maintenance Work Agreement in connection with the provision by Zhejiang Shunchang of certain maintenance work in respect of the Jinhua Section of the Ningbo-Jinhua Expressway to the Target Company. The Maintenance Work Agreement has a term of three years from 1 January 2013 to 31 December 2015 and the Target Company has agreed to pay an annual fee of RMB5,366,206 (or RMB16,098,618 for all three years) for the maintenance work performed over this period.

New Service Area Operation Agreement

Upon completion of the Communications Group Agreement, the Target Company and Zhejiang Communications Investment will enter into the New Service Area Operation Agreement, in connection with the operation in the Dongyang Service Area, including, the provision of, among other things, petrol station services, catering services, supermarket services, vehicle repair services. The term of the New Service Area Operation Agreement is for three years. Zhejiang Communications Investment will be entitled to 20% of the annual profits recognised by it through managing the Dongyang Service Area if the amount of such profits is not more than RMB3,762,479, and 80% of any additional profits which is more than RMB3,762,479 in that year. The rest of the profits will be paid to the Target Company. The Target Company will not be required to make any payment to Zhejiang Communications Investment under the New Service Area Operation Agreement.

New Service Area Utilities Services Agreement

Upon completion of the Communications Group Agreement, the Target Company and Zhejiang Communications Investment will enter into the New Service Area Utilities Services Agreement, in connection with the provision of utilities facilities and services in the Dongyang Service Area such as car park, washroom, lounge area. The term of the New Service Area Utilities Services Agreement is for three years. The Target Company will be required to pay an annual fee of RMB600,000 to Zhejiang Communications Investment for the services provided under this agreement.

20 LETTER FROM THE BOARD

(2) Exempt Connected Transactions

Loan Agreements and Credit Agreement

As at the Latest Practicable Date, the Target Company is a party to each of the Loan Agreements and the Credit Agreement pursuant to which (in the case of the Loan Agreements) Communications Group agreed to entrust Zhejiang Communications Finance to provide, and (in the case of the Credit Agreement) Zhejiang Communications Finance agreed to provide, to the Target Company the Loans in the total maximum amount of RMB410,000,000 (equivalent to approximately HK$506,172,840) at an interest rate of (in the case of the Loan Agreements) 5.24% per annum and (in the case of the Credit Agreements) 5.40% per annum respectively. The term of the Loan Agreements is from 28 February 2013 to 10 August 2015 and they shall be repaid in full at the end of the term. The term of the Credit Agreement is from 8 March 2013 to 7 March 2014 and it shall also be repaid in full at the end of the term. The Target Company, with written consent of the Communications Group, may prepay the Loan Agreements subject to the payment of applicable interests to be calculated on the basis of the actual number of days and the amount utilised under the Loan Agreements. The Target Company may also prepay the Credit Agreement after obtaining written consent of Zhejiang Communications Finance and subject to the payment of applicable interests to be calculated on the basis of the actual number of days and the amount utilised under the Credit Agreement. The Loans were granted on the credit of the Target Company and no security was granted by the Target Company to Communications Group or Zhejiang Communications Finance to secure the Loans.

As at the Latest Practicable Date, the Target Company has utilised the full amount of the Loans under the Loan Agreements and the Credit Agreement.

21 LETTER FROM THE BOARD

8. RELATIONSHIP BETWEEN THE PARTIES AND LISTING RULES IMPLICATIONS

As at the Latest Practicable Date, Communications Group holds approximately 67% of the issued share capital of the Company. By virtue of this shareholding interest, Communications Group is a substantial shareholder (as defined in the Listing Rules) of the Company. Therefore, Communications Group is a connected person of the Company and as a result, the Communications Group Agreement constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules. Under the terms of the Yiwu Agreement, completion of the Yiwu Agreement is conditional upon, among other things, the prior completion of the Communications Group Agreement (but not vice versa). Accordingly, although Yiwu Development is an Independent Third Party, Yiwu Development is also treated as a connected person of the Company and the Yiwu Agreement also constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules. As the relevant percentage ratio for the Acquisitions is over 5% but less than 25% (with the consideration under the Acquisition Agreements being, whether individually or in aggregate, more than HK$10,000,000), the Acquisitions also constitute discloseable transactions for the Company under Chapter 14 of the Listing Rules.

On the above basis, the Acquisitions are subject to the reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules applicable to connected transactions, and reporting and announcement requirements under Chapter 14 of the Listing Rules applicable to discloseable transactions.

None of the Directors has any material interest in the transactions contemplated under the Acquisition Agreements or is required to abstain from voting on the relevant board resolution approving the Acquisition Agreements and the transactions contemplated thereunder.

In view of the interest of Communications Group in the Acquisition Agreements, Communications Group and its associates will abstain from voting at the AGM on the resolutions in relation to the Acquisition Agreements and the transactions contemplated thereunder.

9. PROPOSED ISSUE OF DOMESTIC CORPORATE BONDS IN THE PRC

The Company announced on 20 March 2013 that on 19 March 2013, the Board approved a proposal to submit to the Shareholders at the AGM for consideration and approval of a proposed offer and issue of Domestic Corporate Bonds in the PRC with an aggregate principal amount of up to RMB1 billion for general working capital purposes.

According to Article 75 of the Articles of Association, the proposed issue of the Domestic Corporate Bonds requires approval of the Shareholders by special resolution. The Company proposes to convene the AGM for consideration and approval of the proposal.

The proposed issue of the Domestic Corporate Bonds also requires approval of the CSRC. The timing of the proposed issue of the Domestic Corporate Bonds will depend on the timing of the CSRC approval and the conditions of the bonds market in the PRC.

22 LETTER FROM THE BOARD

Details of the terms of the proposed Domestic Corporate Bonds as approved by the Board (which are still subject to the approval of the Shareholders at the AGM and the approval of the CSRC) are set forth below:

(1) Issuer: The Company.

(2) Place of issue: The PRC.

(3) Aggregate principal amount: Up to RMB1 billion, which can be issued in single or multiple tranche(s) subject to the approval of the CSRC. Subject to the granting of authority by the Shareholders to the Board at the AGM, details of issue size and tranches are intended to be determined by the Board according to the financial requirements of the Company and market conditions prevailing at the time of issue.

(4) Arrangement for issue to The Domestic Corporate Bonds will not be offered to the Shareholders: Shareholders on a preferential basis.

(5) Maturity: Up to 10 years, the Domestic Corporate Bonds may be issued in single or multiple tranche(s) with different maturity. Subject to the granting of authority by the Shareholders to the Board at the AGM, the maturity and the issue size of each tranche are intended to be determined by the Board according to the requirements of the Company and market conditions prevailing at the time of issue.

(6) Use of proceeds: The proceeds from the proposed issue of the Domestic Corporate Bonds are intended to be used by the Company to improve its capital structure and to supplement the working capital of the Company. Subject to the granting of authority by the Shareholders to the Board at the AGM, details of the use of proceeds are intended to be determined by the Board according to the financial conditions of the Company.

(7) Listing: An application for listing and trading of the Domestic Corporate Bonds (subject to the fulfillment of relevant listing requirements) shall be made with the Shanghai Stock Exchange as soon as practicable following the completion of the proposed issue of the Domestic Corporate Bonds. Subject to the approval of relevant regulatory authorities, applications for listing and trading of the Domestic Corporate Bonds may be made with other stock exchange(s) permitted by applicable laws.

(8) Term of validity of the The proposed Shareholders’ resolutions to be passed at the resolutions: AGM in respect of the proposed issue of Domestic Corporate Bonds, if passed, shall be valid for 30 months from the date of passing of the relevant resolutions at the AGM.

23 LETTER FROM THE BOARD

Subject to the approval and authorisation by the Shareholders of the proposed issue of the Domestic Corporate Bonds at the AGM, the interest rate of the Domestic Corporate Bonds will be determined by the Board through a book-building process with reference to the prevailing conditions of the bond market in the PRC. The Domestic Corporate Bonds proposed to be issued are not convertible into shares of the Company.

It is proposed to be submitted to the Shareholders for consideration and approval the granting of authority to the Board to deal with all matters relating to the proposed issue and listing of the Domestic Corporate Bonds in the absolute discretion of the Board in accordance with the applicable laws and regulations (including, among others, the Company Law, the Securities Law and the Tentative Methods) and the Articles of Association, including, but not limited to the following:

(1) to formulate specific plan and terms for the issue of the Domestic Corporate Bonds according to the requirements of the relevant laws and regulations, the Shareholders’ resolutions passed at the AGM and market conditions, including but not limited to the issue size, maturity, type of bonds, interest rate and method of determination, timing of issue (including whether to issue in tranches and their respective size and maturity), security plan, whether to allow repurchase and redemption, use of proceeds, rating, subscription method, term and method of repayment of principal and interests, listing and all other matters relating to the issue and listing of the Domestic Corporate Bonds;

(2) to appoint intermediaries in connection with the listing applications of the Domestic Corporate Bonds and the actual listing of the bonds; including but is not limited to the authorisation, execution, performance, variation and completion of all necessary documents, contracts and agreements (including, among others, prospectus, subscription agreement, underwriting agreement, trustee deed, listing agreement, announcements and other legal documents) and other relevant disclosures as required by relevant laws and regulations;

(3) to appoint a trustee for the proposed issue of the Domestic Corporate Bonds, to execute relevant trust deed and to determine rules for meetings of holders of the Domestic Corporate Bonds;

(4) subject to any matters which require Shareholders’ approval, to make appropriate adjustments to the proposal for the proposed issue and terms of the Domestic Corporate Bonds in accordance with the comments (if any) from the relevant PRC regulatory authorities; and

(5) in the event of the Company’s expected failure to repay the principal and interests of the Domestic Corporate Bonds as scheduled or when such amounts fall due, to implement, as a minimum, the following measures:

(a) not to declare any profit distributions to the Shareholders;

(b) to postpone the implementation of capital expenditure projects such as material investments, acquisitions or mergers;

24 LETTER FROM THE BOARD

(c) to reduce or discontinue the payment of salaries and bonuses of the Directors and senior management of the Company; and

(d) not to transfer or second away any key officers of the Company;

(6) to deal with any other matters relating to the proposed issue and listing of the Domestic Corporate Bonds;

(7) subject to the term of validity of the Shareholders’ resolutions as mentioned above, the authority granted to the Board to deal with the above matters will take effect from the date of the passing of the relevant Shareholders’ resolution at the AGM until all the authorized matters in relation to the proposed issue of the Domestic Corporate Bonds have been completed; and

(8) at the same time as the authorities mentioned under paragraphs (1) – (6) above are granted, the Board shall be authorised to delegate to Mr. Wu Junyi, the chief financial officer of the Company, the powers to deal with all specific matters relating to the proposed issue and listing of the Domestic Corporate Bonds within the limit of the authorities granted to the Board as mentioned above.

The Board believes that the proposed issue of the Domestic Corporate Bonds will provide the Company with a further source of funding. The Board considers that the proposed issue of the Domestic Corporate Bonds will improve the debt structure of the Company and increase the general working capital of the Company.

10. THE AGM

You will find on pages 118 to 123 of this Circular a notice of the AGM to be held at 12/F, Block A, Dragon Century Plaza, 1 Hangda Road, Hangzhou, Zhejiang Province, the PRC on Friday, 21 June 2013 at 3 p.m..

A form of proxy for use at the AGM is enclosed. Whether or not you are able to attend the meeting in person, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon. In case of H Shares, the proxy form shall be lodged with the Company’s H Shares Registrar, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, not less than 24 hours before the time for holding the AGM (or any adjournment thereof). Completion and delivery of the form of proxy will not preclude you from attending and voting in person at the AGM or any adjournment thereof should you so wish.

25 LETTER FROM THE BOARD

11. CONCLUSIONS AND RECOMMENDATIONS

The Independent Board Committee comprising all the independent non-executive Directors, namely, Mr. Zhang Junsheng, Mr. Zhou Jun and Mr. Pei Ker-Wei, has been formed to consider the Acquisitions, and ABCI Capital Limited has been appointed as the Company’s Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders as to whether the terms of the Acquisitions are fair and reasonable and whether the Acquisitions are in the interests of the Company and the Shareholders as a whole. The Directors (excluding the members of the Independent Board Committee, whose views are set out in the letter from the Independent Board Committee on page 27 of this Circular) consider that the terms of the Acquisitions are on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

The text of the letter from Independent Board Committee is set out on page 27 of this Circular and the text of the letter from the Independent Financial Adviser containing its advice is set out on pages 28 to 42 of this Circular.

The Directors (including the independent non-executive Directors) consider that the terms of the proposed issue of Domestic Corporate Bonds are on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors (including the independent non-executive Directors) recommend the Shareholders to vote in favour of the relevant resolution to approve the proposed issue of Domestic Corporate Bonds and the terms thereof at the AGM.

12. OTHER INFORMATION

A report on the valuation of the entire equity interest in the Target Company has been prepared by Jones Lang LaSalle and is set out in Appendix I of this Circular.

A report on the traffic and revenue of the Jinhua Section of Ningbo-Jinhua Expressway has been prepared by Wilbur Smith and is set out in Appendix II of this Circular.

As the appraised value of the entire equity interest of the Target Company under the Valuation Report was prepared through the income approach based on the discounted cash flow method, such valuation constitutes a profit forecast under Rule 14.61 of the Listing Rules. A letter from the Board in compliance with Rule 14.62(3) of the Listing Rules and a letter from Deloitte in compliance with Rule 14.62(2) of the Listing Rules are included in Appendix III of this Circular.

Your attention is also drawn to the letter from the Independent Board Committee, the letter from the Independent Financial Adviser and the additional information set out in the appendices to this Circular and the notice of the AGM.

Yours faithfully, For and on behalf of Zhejiang Expressway Co., Ltd. Zhan Xiaozhang Chairman

26 LETTER FROM THE INDEPENDENT BOARD COMMITTEE

(A joint stock limited company incorporated in the People’s Republic of China with limited liability) (Stock Code: 0576)

7 May 2013

To the Independent Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTIONS IN RELATION TO ACQUISITION OF AN AGGREGATE 76.55% EQUITY INTEREST IN ZHEJIANG JINHUA YONGJIN EXPRESSWAY CO., LTD. AND NOTICE OF 2012 ANNUAL GENERAL MEETING

We refer to the circular of the Company dated 7 May 2013 to the Shareholders (the “Circular”), of which this letter forms part. Terms defined in the Circular shall have the same meanings when used in this letter, unless the context otherwise requires.

We have been appointed by the Board as members of the Independent Board Committee to advise you as to the fairness and reasonableness of the terms of the Acquisition Agreements and whether the Acquisitions are in the interests of the Company and the Shareholders as a whole. ABCI Capital Limited has been appointed as the independent financial adviser to advise you and us in this regard. Details of the recommendations from ABCI Capital Limited are set out in its letter of advice on pages 28 to 42 of the Circular.

Your attention is also drawn to the letter from the Board set out on pages 7 to 26 of the Circular and the additional information set out in the appendices to the Circular.

Having considered the terms of the Acquisition Agreements, and taken into account the advice from ABCI Capital Limited and in particular the principal factors and reasons considered by ABCI Capital Limited as set out in its letter of advice, we are of the view that (i) the terms of the Communications Group Agreement and the Yiwu Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; and (ii) the Communications Group Acquisition and Yiwu Acquisition are in the ordinary and usual course of business of the Company and in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the relevant resolution to approve the Communications Group Agreement and the Yiwu Agreement and the transactions contemplated thereunder at the AGM.

Yours faithfully, Independent Board Committee Mr. Zhang Junsheng Mr. Zhou Jun Mr. Pei Ker-wei Independent non-executive Independent non-executive Independent non-executive Director Director Director 27 LETTER FROM ABCI CAPITAL LIMITED

The following is the text of a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders relating to the terms of the Communications Group Agreement and the Yiwu Agreement and the transactions contemplated thereunder, prepared for the purpose of incorporation in this Circular:

7 May 2013

To the Independent Board Committee and the Independent Shareholders of Zhejiang Expressway Co., Ltd.

Dear Sirs,

DISCLOSEABLE AND CONNECTED TRANSACTIONS IN RELATION TO ACQUISITION OF 76.55% OF EQUITY INTERESTS IN ZHEJIANG JINHUA YONGJIN EXPRESSWAY CO., LTD.

INTRODUCTION

We refer to our engagement as the independent financial adviser to advise the Independent Board Committee and Independent Shareholders in respect of the entering into of the Communications Group Agreement and the Yiwu Agreement and the transactions contemplated thereunder, details of which are set out in the Letter from the Board contained in the circular of the Company dated 7 May 2013 (the “Circular”) of which this letter forms part. Unless the context requires otherwise, capitalized terms used in this letter shall have the same meanings as those defined in the Circular.

On 20 March 2013, the Board made an announcement (the “Announcement”) regarding the Company entered into the Communications Group Agreement with Communications Group pursuant to which the Company conditionally agreed to purchase from Communications Group a 66.283% equity interest in the Target Company held by Communications Group at a cash consideration of RMB655,356,327 (equivalent to approximately HK$809,081,885). On the same date, the Company entered into the Yiwu Agreement with Yiwu Development pursuant to which the Company conditionally agreed to purchase from Yiwu Development a 10.267% equity interest in the Target Company held by Yiwu Development at a cash consideration of RMB101,512,354 (equivalent to approximately HK$125,323,894). The Company currently owns a 23.45% equity interest in the Target Company. Upon completion of both the Communications Group Acquisition and the Yiwu Acquisition, the Target Company will become a wholly-owned subsidiary of the Company. In the event that only the Communications Group Acquisition were completed, the Company would beneficially own in aggregate 89.733% of the Target Company’s equity interest.

28 LETTER FROM ABCI CAPITAL LIMITED

As the relevant percentage ratio for the Acquisitions is over 5% but less than 25%, the Acquisitions also constitute discloseable transactions for the Company under the Listing Rules. On the above basis, the Communications Group Acquisition and the Yiwu Acquisition are subject to the reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules. In view of the interest of Communications Group in the Acquisition Agreements, Communications Group and its respective associates will abstain from voting at the AGM on the resolutions in relation to the Communications Group Agreement and the Yiwu Agreement and the transactions contemplated thereunder.

The Independent Board Committee comprising all of the independent non-executive Directors, namely Mr. Zhang Junsheng, Mr. Zhou Jun and Mr. Pei Ker-Wei, has been established to make recommendation to the Independent Shareholders in relation to the Communications Group Agreement and the Yiwu Agreement and the transactions contemplated thereunder. We have been appointed to advise the Independent Board Committee and the Independent Shareholders as to whether the Communications Group Agreement and the Yiwu Agreement and the transactions contemplated thereunder are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole.

BASIS OF OUR OPINION

In formulating our advice and recommendations, we have relied on the accuracy of the information and facts supplied, and the opinions expressed by the Company, its Directors and its management to us. We have assumed that all statements of belief and intention made by the Directors and the management of the Company were made after due enquiry. We have also assumed that all information, representations and opinion made were true, accurate and complete at the time they were made and continued to be true at the date of the Circular and will remain so up to the time of the AGM. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Company, its Directors and its management, and we have been advised by the Directors and the management of the Company that no material facts have been omitted from the information provided.

We consider that we have reviewed sufficient information to reach an informed view, to justify our reliance on the accuracy of the information provided to us by the Company, its Directors and its management and to provide a reasonable basis for our recommendation. We have not, however, conducted any form of in-depth investigation into the business affairs, financial position or future prospects of the Group, the Target Company and the counterparties to the Communications Group Agreement and the Yiwu Agreement, nor carried out any independent verification of the information supplied, representations made or opinions expressed by the Company, its Directors and its management. Our opinion is necessarily based on the financial, economic, market and other conditions in effect and the information made available to us as at the Latest Practicable Date. The Directors should note that subsequent developments (including any material change in market and economic conditions) may affect and/or change this opinion and that we do not have any obligation to update, revise or reaffirm this opinion.

29 LETTER FROM ABCI CAPITAL LIMITED

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion and recommendations regarding the Communications Group Acquisition and the Yiwu Acquisition, we have considered the following principal factors and reasons:

1. Background to and reasons for entering into the Acquisition Agreements

1.1 Background of the Group

The Group is principally engaged in investing in, developing and operating high-grade roads in the PRC. The Group also carries on certain other businesses such as automobile servicing, operation of gas stations and billboard advertising along expressways, as well as securities related business. The Group currently operates Zhejiang Section of the Shanghai- Hangzhou-Ningbo Expressway and the Shangsan Expressway, both of which are situated within Zhejiang Province. As at 31 December 2012, the total length of expressways managed by the Group was approximately 389.6 km.

Set out below is a summary of the Group’s audited consolidated financial results for the years ended 31 December 2011 and 2012:

For the year ended 31 December 2011 2012 Revenue Profit after tax Revenue Profit after tax (Note) (Note) RMB’000 % RMB’000 % RMB’000 % RMB’000 %

Toll revenue 3,522,510 51.9% 1,695,078 82.0% 3,548,692 53.0% 1,637,244 87.6% Service area and advertising businesses 1,916,564 28.3% 71,763 3.5% 2,025,429 30.2% 66,169 3.5% Securities operation 1,342,278 19.8% 299,101 14.5% 1,126,137 16.8% 165,669 8.9%

Total revenue/Total profit after tax 6,781,352 100% 2,065,942 100% 6,700,258 100% 1,869,082 100%

Note: It represents revenue after deducting the sales related taxes.

We note that the expressway operations have been the major business segment of the Group. For the years ended 31 December 2011 and 2012, the revenue of the Group’s expressway operations accounted for approximately 51.9% and 53.0% of the Group’s total revenue, respectively, while the profit after tax of the Group’s expressway operations accounted for approximately 82.0% and 87.6% of the Group’s total profit after tax, respectively. If taking into account the nature of service area and advertising businesses, the Group’s expressway related business would account for approximately 80.2% and 83.2% of the Group’s total revenue, respectively, for the years ended 31 December 2011 and 2012. During the same period, the Group’s expressway related business accounted for approximately 85.5% and 91.1% of the Group’s total profit after tax, respectively.

30 LETTER FROM ABCI CAPITAL LIMITED

1.2 Background of the Target Company and expressway assets held by the Target Company

The Target Company is a limited liability company established in the PRC on 8 February 2002 and with a registered capital of RMB900,000,000. It is principally engaged in the operation and management of Jinhua Section of the Ningbo-Jinhua Expressway, which commenced operation since December 2005. The Ningbo-Jinhua Expressway is a branch line of the Shenyang-Haikou Expressway within the State expressway network linking the eastern and western parts of Zhejiang Province, connecting to Hangjinqu Expressway and Ningbo Loop Expressway. Jinhua Section of the Ningbo-Jinhua Expressway, under the Target Company’s operation, is a dual four-lane expressway located in Chengzhou City, Dongyang City, Yiwu City and Jinhua City of Zhejiang Province with a total length of approximately 69.7 km. In 2012, Jinhua Section of the Ningbo-Jinhua Expressway recorded an average daily traffic volume of 12,084 vehicles in full-trip equivalents. As at the Latest Practicable Date, the toll collection rights period of the Ningbo-Jinhua Expressway is pending final approval by the relevant governmental authorities. In accordance with the relevant expressway regulations in the PRC, the toll collection rights period of an expressway shall not be more than 25 years.

1.3 Financial information of the Target Company

Set out below is a summary of major financial information as extracted from the Target Company’s audited financial statements for the years ended 31 December 2011 and 2012 prepared by its PRC statutory auditors:

For the year ended/ As at 31 December 2011 2012 RMB’000 RMB’000 (audited) (audited)

Revenue (Note) 213,333 227,618 Depreciation & amortization 84,215 89,464 Finance costs 87,567 83,234 EBITDA 143,674 153,994 Loss after tax (28,108) (18,704) Net asset value 669,588 650,883

Note: It represents revenue after deducting the sales related taxes.

31 LETTER FROM ABCI CAPITAL LIMITED

We note that the Target Company has experienced a growth in revenue although still operating at loss. For the years ended 31 December 2011 and 2012, the Target Company achieved a revenue of approximately RMB213.3 million and RMB227.6 million, respectively, representing an increase of approximately 6.7%. During the same period of time, the Target Company incurred a loss of approximately RMB28.1 million and RMB18.7 million, respectively, representing a decrease of approximately 33.5%. We are advised by the Company’s management that it is normal for an infrastructure project company to record losses during the early stage of its operation due to the effects of financing costs and amortization charges. Notwithstanding the loss of its operation, we note that the Target Company has performed relatively well in terms of EBITDA. For the years ended 31 December 2011 and 2012, the EBITDA of the Target Company amounted to approximately RMB143.7 million and RMB154.0 million, respectively, representing an increase of approximately 7.2%.

1.4 Economic and industry development of Zhejiang Province

According to “The 12th Five-Year Plan” endorsed by the Chinese Communist Party Central Committee, the PRC’s GDP is estimated to grow at approximately 7% annually over the 12th Five-Year-Plan period. Against the backdrop of economic expansion and accelerated industrialization, greater demand for source of energy and raw materials bring in higher level of market activity and circulation of labor and commodities. As set out in “The 12th Five-Year Plan on Transport” published by the Ministry of Transport of the PRC, road transportation is one of the necessities to facilitate national economic growth and therefore toll road operation is expected to ride on this growing trend. The table below set out the annual growth rate of the real GDP and urbanization rate of Zhejiang Province and the PRC between 2006 and 2012:

2006 2007 2008 2009 2010 2011 2012 (%) (%) (%) (%) (%) (%) (%)

Real GDP growth rate – Zhejiang Province 13.9 14.7 10.1 8.9 11.9 9.0 8.0 Real GDP growth rate – the PRC 12.7 14.2 9.6 9.2 10.4 9.3 7.8 Urbanization rate (Note) – Zhejiang Province 56.5 57.2 57.6 57.9 61.6 62.3 NA Urbanization rate – the PRC 44.4 45.9 47.0 48.3 50.0 51.3 NA

Note: Urbanization rate represents the percentage of urban population to total population.

Source: National Bureau of Statistics of China, Zhejiang Provincial Bureau of Statistics

According to “The 12th Five-Year Plan on New Urbanization in Zhejiang Province”, Zhejiang Province is one of the provinces having achieved the highest level of urbanization with the rate estimated to reach approximately 63% by 2015. The rural and urban integration development in Zhejiang Province is expected to gain more momentum during the 12th Five- Year-Plan period. Because of the economic and social drive behind this transformation, it is believed that the transportation in Zhejiang Province will continue to benefit from high level of infrastructure construction, traffic consolidation and logistic upgrade.

32 LETTER FROM ABCI CAPITAL LIMITED

1.5 Traffic volume of Jinhua Section of the Ningbo-Jinhua Expressway

The table below summarizes the daily traffic volume of Jinhua Section of the Ningbo- Jinhua Expressway provided by the Company for the years ended 31 December 2011 and 2012:

Average daily traffic volume (vehicle/day) Fucun Huailu – Huailu Junction – Fucun – Yiting – Xucun – Yiwu – Dongyang – Huailu Junction – Caizhai – Fucun Yiting Xucun Yiwu Dongyang Huailu Junction Caizhai Jinhua Total

2011 9,248 9,198 9,203 9,083 10,771 13,141 14,728 11,471 12,166 10,775 2012 10,109 10,182 10,291 10,539 12,618 15,025 16,593 12,134 12,718 12,084 Change (%) 9.3% 10.7% 11.8% 16.0% 17.1% 14.3% 12.7% 5.8% 4.5% 12.1%

From the table above, we note that the traffic volume of Jinhua Section of the Ningbo- Jinhua Expressway and most of its sub-sections recorded double digit growth rate for the year ended 31 December 2012. Based on the traffic volume and toll revenue study of Jinhua Section of the Ningbo-Jinhua Expressway (the “Traffic Study Report”) as set out in Appendix II in the Circular prepared by Wilbur Smith Associates, an independent traffic consultant (the “Traffic Consultant”), the average daily traffic volume of Jinhua Section of the Ningbo-Jinhua Expressway is projected to increase from 12,084 vehicles in 2012 to 36,784 vehicles in 2030, representing a CAGR of approximately 6.38%. Upon completion of the Acquisitions, the Group is able to increase the length of expressways under management by approximately 18% to 459.4 km while the traffic volume of Jinhua Section of the Ningbo- Jinhua Expressway is projected to grow at a CAGR of approximately 6.38% till 2030.

1.6 Reasons and benefits for entering into the Acquisition Agreements

As disclosed in the Letter from the Board, after completion of the Acquisitions, the total length of expressways managed by the Company will increase from approximately 389.6 km to approximately 459.4 km. The main businesses of the Company will be enhanced through the Acquisitions which help to increase the market share and competitive strength of the Company in Zhejiang Province. Jinhua Section of Ningbo-Jinhua Expressway connects with Shaoxing Section of Ningbo-Jinhua Expressway (which is managed by Shengxin Expressway Co., Ltd., in which the Company currently owns 50% equity interest), and crosses with the Shangsan Expressway managed by the Company. The Directors believe that the Acquisitions will facilitate the Company to better utilise its experience and advantages in toll operation and to complement the Company’s existing network of expressways, and are in line with the Company’s development strategy.

33 LETTER FROM ABCI CAPITAL LIMITED

We note from the Group’s 2011 Annual Report that it is the Group’s strategy to continue seeking suitable investment in and acquisition of expressway projects for the steady development of the Company. As described in “Zhejiang Province Construction Plan on Highways and Waterborne Transport” published by Zhejiang Provincial Department of Transportation, the Ningbo-Jinhua Expressway is regarded as a “Golden link” traversing mid-eastern part of Zhejiang Province, connecting major expressways in Ningbo, Shaoxing and Jinhua and forming transport junction with Hangjinqu Expressway, Shangsan Expressway and Zhuyong Expressway and to complement the Group’s existing network. The Group has continued to establish strong business presence in the operation of toll road within Zhejiang Province and pursued similar acquisition strategy in the past in order to expand its market share of traffic volume in Zhejiang Province. In July 2012, the Company announced the acquisition of 50% equity interest of Shengxin Expressway Co., Ltd, which owns the toll collection rights to Shaoxing Section of the Ningbo-Jinhua Expressway, located in Xinchang City and Shengzhou City with a total length of 73 km, connecting Jinhua Section of the Ningbo-Jinhua Expressway.

The Target Company is beneficially owned as to 23.45% by the Company since June 2007. Upon completion of the Acquisitions, the Target Company will become a wholly- owned subsidiary, which enables the Company to gain management control over the Ningbo- Jinhua Expressway. The Target Company could in turn, be fully benefited from the Group’s expertise in toll operation. We concur with the Directors’ view that the Acquisitions are in line with the Company’s development strategy. We note that the toll collection rights period of Jinhua Section of the Ningbo-Jinhua Expressway is pending final approval by the relevant governmental authorities, creating uncertainty to the Target Company’s operations. In this connection, the parties to the Acquisition Agreements have agreed to enter into supplemental agreements to adjust downward the considerations for the Acquisitions with reference to the revised valuation of the Target Company taking into account the difference of the toll collection rights period. The Directors consider that this consideration adjustment arrangement helps mitigate the uncertainty brought by the change of toll collection rights period. Furthermore, it is worth noting that the Group has strong level of bank and cash balances and the Directors believe that the Acquisitions will better utilize its cash by increasing the Group’s investment in the expressways, in particular to those projects which the Group currently operates.

Having taken into account the Group’s business development strategy, the Group’s management control over the Target Company upon completion of the Acquisitions, the traffic volume projection by the Traffic Consultant and the steady improvement in the financial performance of the Target Company, we consider that the entering into of the Acquisition Agreements is reasonable under the Group’s present development.

34 LETTER FROM ABCI CAPITAL LIMITED

2. Principal terms of the Acquisition Agreements

2.1 Basis of Consideration

The considerations for the Acquisitions were determined after arm’s length negotiations amongst the Company, Communications Group and Yiwu Development and having taken into account a number of factors, including, amongst others, the Valuation Report by Jones Lang LaSalle, as well as the PRC Valuation Report by the PRC Domestic Valuer. As stated in the Letter from Board, the Company appointed and relied on Jones Lang LaSalle to carry out a valuation in respect of the Target Company. As at 30 September 2012, the appraised value of the Target Company amounted to approximately RMB1,026.0 million (the “JLL Valuation”). Details of the Valuation Report are set out in Appendix I in this Circular. It is noted that pursuant to the relevant PRC laws and regulations, the Acquisitions as a transfer of State-owned asset requires approval from Zhejiang SASAC. In this connection, Communications Group also appointed the PRC Domestic Valuer to prepare the PRC Valuation Report to meet the requirement of Zhejiang SASAC. As at 30 September 2012, the PRC appraised value of the entire equity of the Target Company was approximately RMB988.7 million (the “PRC Valuation”). It is noted that such PRC Valuation Report has already been submitted to Zhejiang SASAC for registration.

The considerations for the Communication Group Acquisition and the Yiwu Acquisition (collectively the “Considerations”) amounted to approximately RMB655.4 million and RMB101.5 million, respectively, which represent a discount of approximately 3.7% to the respective equity values under the JLL Valuation. Notwithstanding the fact that the Considerations appears in par with the appraised equity values under the PRC Valuation, the Directors confirm that the Company relies on the JLL Valuation instead of the PRC Valuation in accessing the Consideration. In this aspect, the Directors confirm that Company has no appointment relationship with the PRC Domestic Valuer. In addition, the Company did not involve in the preparation of the PRC Valuation Report. The Directors consider that the PRC Valuation Report is mainly for the use of Communications Group and Zhejiang SASAC.

We understand that the JLL Valuation, to a considerable extent, was evaluated with reference to the Traffic Study Report. For the purpose of assessing whether the JLL Valuation could provide a benchmark to assess the fairness and reasonableness of the Considerations, we have reviewed the Valuation Report and the Traffic Study Report and have interviewed Jones Lang LaSalle and the Traffic Consultant regarding the basis of preparation of their respective reports. We also note from our discussions that Jones Lang LaSalle has the required experience in performing the valuation of the expressway assets while the Traffic Consultant has the required experience in performing the forecast studies on traffic volume and toll revenue for expressways in the PRC.

35 LETTER FROM ABCI CAPITAL LIMITED

2.2 The Valuation Report

(a) Methodologies

We understand that Jones Lang LaSalle has considered three generally accepted valuation approaches, namely the market approach, cost approach and income approach in arriving at the JLL Valuation. Jones Lang LaSalle considers that the market approach is inappropriate as they have not identified any current market transactions which are comparable to the Acquisitions given that market transactions on expressway assets tend to have very different transaction prices considering a number of factors including geographical areas, toll rates and traffic, and operating stages and status of the expressway assets. Jones Lang LaSalle also considers that the cost approach is inappropriate since the toll road operation requires specific expertise and this approach does not directly incorporate information about the economic benefits derived from the intangible assets of the Target Company such as enterprise skills and management team.

As advised by Jones Lang LaSalle, they have adopted the discounted cash flow method (“DCF”) under the income approach to derive a present fair value from the future value of the Target Company’s business. This method eliminates the discrepancy in time value of money by using a discount rate to reflect all business risks including intrinsic and extrinsic uncertainties in relation to the Target Company’s business. Based on the previously mentioned analysis, we concur with the views of Jones Lang LaSalle that DCF is an appropriate method in valuing the Target Company based on the facts that (i) the recurring nature of the toll revenue derived from the assets held by the Target Company; and (ii) DCF is the most commonly used valuation method in valuing infrastructure project.

(b) Discount rate

When applying DCF to estimate the present market value of the Target Company, it is necessary to determine an appropriate discount rate for the assets under review. We note that Jones Lang LaSalle has used the Capital Assets Pricing Model (the “CAPM”) to estimate the required rate of return on equity of the Target Company. We understand from Jones Lang LaSalle that the CAPM technique is widely accepted in the investment and financial analysis communities for the purpose of estimating a company’s required rate of return on equity. In arriving at the discount rate, Jones Lang LaSalle has taken into account a number of factors including (i) risk free rate; (ii) market return; (iii) company specific risk; and (iv) beta of a number of comparable companies. Such comparable are companies listed on the Stock Exchange and engage in similar business to the Target Company. As such, we are of the view that it is fair and reasonable to derive beta from these peer companies. Moreover, in view of the fact that the Target Company is a private company, Jones Lang LaSalle applied a lack of marketability discount rate to the Target Company’s equity interest based on their analysis and market average.

36 LETTER FROM ABCI CAPITAL LIMITED

Jones Lang LaSalle also conducted sensitivity analysis and profile the results based on a 5%, 10% and 15% variations from the derived discount rate of 10.79%. To ascertain the reasonableness of the selection of the range for discount rates, we (i) discussed with Jones Lang LaSalle and were confirmed that the range is in line with the industry practice and consistent with their experience in other similar transactions and (ii) reviewed the discount rates applied in other acquisition of toll roads transactions. We noted that the range of the discount rate of other toll road transactions fell within that of the selective range of the discount rate. Based on the works performed above, we are not aware of any matters that will cause us to doubt the reasonableness of the selection of the range for discount rates or the methodology of the sensitivity analysis.

We have obtained relevant information and interviewed Jones Lang LaSalle to assess the fairness and reasonableness of the discount rate and the discount for lack of marketability and concur with view of Jones Lang LaSalle that the factors for the discount rate used in the JLL Valuation are in line with market practice.

We note that Jones Lang LaSalle has considered and relied to a considerable extent on the traffic volume and toll revenue study for Jinhua Section of the Ningbo- Jinhua Expressway produced in the Traffic Study Report when determining the JLL Valuation. Jones Lang LaSalle believed that the forecast of those data are reasonable. We have interviewed Jones Lang LaSalle and the Traffic Consultant regarding the basis of projecting the traffic volume and toll revenue of Jinhua Section of the Ningbo-Jinhua Expressway.

We have also obtained and reviewed the work papers prepared by Jones Lang LaSalle and discussed the key accounting assumptions (including cost of goods sold, operating expense and capital expenditure) used in the Valuation Report. Based on the work performed, we are not aware of any factors which would cause us to doubt the fairness and reasonableness of the assumptions used in the JLL Valuation.

2.3 The Traffic Study Report

We have reviewed the Traffic Study Report and discussed with Traffic Consultant on the methodologies, bases and assumptions underlying the estimation on traffic volume and toll revenue of Jinhua Section of the Ningbo-Jinhua Expressway. We note that in forecasting the traffic volume, the Traffic Consultant has (i) collected economic and historical traffic data concerning Jinhua Section of the Ningbo-Jinhua Expressway; (ii) performed route check on Jinhua Section of the Ningbo-Jinhua Expressway; and (iii) built up a traffic model to estimate the traffic volume and toll revenue of Jinhua Section of the Ningbo-Jinhua Expressway.

37 LETTER FROM ABCI CAPITAL LIMITED

In building up the traffic model, the Traffic Consultant has (i) analyzed the existing travel patterns; (ii) used historical traffic data of Jinhua Section of the Ningbo- Jinhua Expressway; (iii) assumed that there will be no change in the toll rate; and (iv) estimated the growth rate of traffic volume based on the GDP of the relevant area (e.g. Zhejiang Province). In addition, we understand from the Traffic Consultant that they have also considered the potential competition to which Jinhua Section of the Ningbo-Jinhua Expressway will be subject to. We have discussed with the Traffic Consultant on the impact of the new expressways on the traffic projection of Ningbo-Jinhua Expressway, and are given to understand that the model adopted by the Traffic Consultant has already taken into account the road network change in future years. As stated in the Traffic Study Report, the Traffic Consultant adopted the generalised cost approach in determining users’ route choice behaviors, which are affected by travel time, trip length and costs. Accordingly, the assumption of road network change is also considered in this model. On this basis, nothing had come to our attention that will cause us to doubt the reasonableness of the impact of new expressways on Ningbo-Jinhua Expressway used by the Traffic Consultant.

With regard to the toll rate, we note that the Traffic Consultant assumes a fixed toll rate over the forecast period. In spite of the uncertainty in change of policies on toll rates, historical toll rate has remained unchanged since the operational commencement of Jinhua Section of the Ningbo-Jinhua Expressway; and therefore, we consider the above mentioned assumption reasonable. Nonetheless, it is worth noting that the valuation of the Target Company could be affected by the possibility of toll rate increases of Jinhua Section of the Ningbo-Jinhua Expressway in the future.

The Traffic Consultant has advised that the underlying assumptions adopted in the Traffic Study Report are normally used, and are fair and reasonable. The Traffic Consultant also advised us that the forecast procedures performed in the Traffic Study Report are internationally recognized and commonly used in the market. Based on our interview with the Traffic Consultant, we have not identified any major issues that would cause us to doubt the fairness and reasonableness of the methodologies and bases applied in the Traffic Study Report. As such, we are of the opinion that the Traffic Study Report provides a reasonable basis for the Valuation Report.

Having considered that the attributable appraised value of the Communications Group Acquisition and Yiwu Acquisition based on the JLL Valuation are higher than Considerations, we concur with the Directors’ view that the basis of determining the Considerations is reasonable.

2.4 Payment arrangements under the Acquisition Agreements

As set out in the Letter from the Board, the Considerations are payable by the Company by cash within 5 business days after the effective date of the Acquisition Agreements. Taking into consideration that the above payment arrangement requires the satisfaction of the condition precedents such as obtaining the Zhejiang SASAC’s approval and the Independent Shareholders’ approval in connection with Acquisition Agreements, we are of the view that the above payment arrangement is on normal commercial terms.

38 LETTER FROM ABCI CAPITAL LIMITED

2.5 Other key terms of the Acquisition Agreements

As disclosed in the Letter from the Board, several key terms of the Acquisition Agreements are disclosed as follows:

(a) Consideration adjustment

The Considerations payable by the Company under the Acquisition Agreements were determined on the assumption that the toll collection rights period of the Ningbo-Jinhua Expressway as finally approved will be 25 years. As Jinhua Section of the Ningbo-Jinhua Expressway commenced operations in late 2005, it is estimated that the relevant collection rights period shall expire in 2030. As at the Latest Practicable Date, the toll collection rights period of the Ningbo-Jinhua Expressway has yet to be approved by the relevant PRC governmental authorities. In the event that the approved toll collection rights period of the Ningbo-Jinhua Expressway is different from 25 years, the Company, Communications Group and Yiwu Development have agreed to enter into supplemental agreements to adjust downward the Considerations with reference to the valuation of the Target Company to be carried out by the PRC Domestic Valuer taking into account of the difference of the toll collection rights period.

In view of the fact that (i) the toll collection period is one of the key assumptions when evaluating the valuation of the Target Company; (ii) the valuation of the Target Company is one of the major factors considered by the Company when determining the Considerations; and (iii) the Company shall comply with the applicable reporting, announcement and independent shareholders’ approval requirements under Chapter 14 and 14A of the Listing Rules in the event that the Considerations are adjusted, we are of the view that the consideration adjustment arrangement is a commercial acceptable mechanism that will provide flexibility to the Company to obtain the latest reference value of the Target Company and safeguard the Group’s interest in the event of change in the toll collection rights period.

(b) Capital injection and repayment of the Loans

The Company and Communications Group have agreed that within 120 days after the completion of the Communications Group Agreement, the Company will inject additional capital into the Target Company. The Company plans to make a capital injection of up to RMB1,400,000,000 into the Target Company so that the Target Company will apply such capital to fully repay the Loans (which are interests bearing) under the Loan Agreements and the Credit Agreement.

39 LETTER FROM ABCI CAPITAL LIMITED

Having considered the fact that (i) Communications Group will cease to be a shareholder of the Target Company after the completion of the Communications Group Acquisition; (ii) the capital injection will broaden the Target Company’s capital base and reduce its financial leverage; (iii) the Target Company incurred substantial finance costs in the past, which amounted to approximately RMB87.6 million and RMB83.2 million for the years ended 31 December 2011 and 2012, respectively. The repayment of the Loans will reduce the finance costs and improve the future financial performance of the Target Company; and (iv) the Group had maintained sufficient financial resources with bank balances and cash of RMB4,846.1 million as at 31 December 2012, we are of the view that the capital injection and the repayment of the Loans to Communications Group are reasonable so far as the Company and the Independent Shareholders are concerned.

3. Potential Financial Effects of the Acquisitions on the Group

3.1 Effect on the earnings of the Company

Upon completion of the Acquisitions, the Target Company will be consolidated into the financial statements of the Group. As mentioned above, the revenue and net loss after tax of the Target Company were approximately RMB227.6 million and RMB18.7 million, respectively for the year ended 31 December 2012. The Target Company currently adopts the units-of-usage method of depreciation where its expressway assets are being depreciated based on the traffic volume. Upon completion of the Acquisitions, the Target Company’s depreciation method will be changed to straight-line method to align with the Group’s accounting policies. Accordingly, the change of the Target Company’s depreciation method will affect the amount of deprecation expenses being charged to the Group’s income statement.

3.2 Effect on working capital of the Company

The total considerations for the Acquisitions amounted to approximately RMB756.9 million shall be satisfied by cash. The Group will also make an additional capital in the Target Company to fully repay the Loans of RMB410.0 million due to Communications Group. According to the Company’s audited financial statements for the year ended 31 December 2012, the Group’s bank balances and cash amounted to RMB4,846.1 million. It is expected that the Acquisitions and repayment of the Loans would result in a reduction in the Group’s bank balances and cash. We note that the Group has sufficient cash to settle the Considerations and repayment of the Loans.

40 LETTER FROM ABCI CAPITAL LIMITED

3.3 Effect on balance sheet of the Company

Before the completion of the Acquisition Agreements, the Group held 23.45% equity interest in the Target Company and was accounted for as investment in associate using the equity method. Upon completion of the Acquisition Agreements, the Target Company will become a wholly-owned subsidiary of the Group and its assets and liabilities will be consolidated into the accounts of the Group. However, in the event that only the Communications Group Acquisition is completed, the Target Company will become a 89.733% owned subsidiary of the Group.

Shareholders should note that the aforementioned analysis is for illustrative purposes only and does not purport to represent how the financial position of the Company will be upon the completion of the Acquisition Agreements.

4. Risk Factors

The Independent Shareholders should be aware of the various risk factors that would pose uncertainties to the Acquisitions, particularly the following principal risks:

4.1 Economic environment

As part of an infrastructure industry, performance of the expressway business is significantly influenced by the surrounding demographical and economic conditions. Economic cycle leads to fluctuation in levels of economic activities and in turn the demand for transportations. Future growth in traffic volume is expected to depend on the continued economic growth and development policies of the PRC and in particular, Zhejiang Province. Any adverse changes in these economies may adversely affect the traffic volume and toll revenue on Jinhua Section of the Ningbo-Jinhua Expressway.

4.2 Competition

The profitability of the Target Company may be adversely affected by the existence of other means of transportation including airline, railways and alternative highways routes. In addition, there is no assurance that the national or provincial government will not propose new toll highways in Zhejiang Province, which might compete with Jinhua Section of the Ningbo-Jinhua Expressway in the foreseeable future.

4.3 Toll policy

Local toll road policies in Zhejiang Province are expected to change due to the introduction of a special project by five ministries and commissions in mid-June 2011 for the rectification of the toll road policy, coupled with the current inflationary pressure and an increase in the prices of petroleum products. Toll standards for vehicle classes and toll calculation methods adopted by expressways in the province are expected to be adjusted further. It is uncertain whether or not changes in toll standards for expressways arising from such adjustments will have an adverse impact on the Target Company’s toll revenue.

41 LETTER FROM ABCI CAPITAL LIMITED

4.4 Toll collection rights period

Jinhua Section of the Ningbo-Jinhua Expressway has not been granted a final approval on its toll collection rights period. Pursuant to the “Regulation on the Administration of Toll Roads” and other rules and regulations of the relevant governmental authorities, the toll collection rights period for expressways shall not exceed 25 years. The Considerations are determined with reference to the valuations of the Target Company, which were prepared on the assumption of 25-years toll collection rights period. If the toll collection rights period of Jinhua Section of the Ningbo-Jinhua Expressway approved by governmental authorities were less than 25 years, the Target Company’s business and operating results might be materially and adversely affected and the Considerations would be adjusted accordingly.

RECOMMENDATIONS

Having taken into account the above factors and reasons, we are of the opinion that (i) the terms of the Communications Group Agreement and the Yiwu Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; and (ii) the Communications Group Acquisition and Yiwu Acquisition are in the ordinary and usual course of business of the Company and in the interests of the Company and the Shareholders as a whole. Therefore, we advise the Independent Board Committee to recommend the Independent Shareholders to vote in favor of the relevant resolution to approve the Communications Group Agreement and the Yiwu Agreement and the transactions contemplated thereunder at the AGM.

Yours faithfully, For and on behalf of ABCI Capital Limited

Kevin Ma Steve Wong Managing Director and Managing Director Co-head of Investment Banking

42 APPENDIX I VALUATION REPORT

The following is the English translation of the Valuation Report dated 19 March 2013 on the entire equity interest in the Target Company for incorporation in this Circular.

19 March 2013

The Directors Zhejiang Expressway Co., Ltd. 12th Floor, Block A Dragon Century Plaza 1 Hangda Road Hangzhou, Zhejiang Province 310007 The People’s Republic of China

Dear Sirs,

In accordance with the instructions from Zhejiang Expressway Co., Ltd. (“Zhejiang Expressway” or the “Company”), we have undertaken a valuation exercise to express an independent opinion of the market value of 100% equity interest in Zhejiang Jinhua Yongjin Expressway Co., Ltd. (“Jinhua Yongjin”) as at 30 September 2012 (the “Valuation Date”). The report which follows is dated 19 March 2013 (the “Report Date”).

The purpose of this valuation is to express an independent opinion of the market value of 100% equity interest in Jinhua Yongjin as at 30 September 2012 for Circular reference.

Our valuation was carried out on a market value basis. Market value is defined as “the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion”.

We have conducted our valuation in accordance with the International Valuation Standards issued by the International Valuation Standards Council (IVSC). The valuation procedures employed include a review of the legal status and economic condition of Jinhua Yongjin and an assessment of key assumptions, estimates, and representations made by the proprietor or the operator of the toll road. All matters essential to the proper understanding of the valuation are disclosed in this Valuation Report.

43 APPENDIX I VALUATION REPORT

Jinhua Yongjin was established in Zhejiang Province in the People’s Republic of China, as a limited liability company. The principal operation of the Target Company is to manage Jinhua Section of the Ninbo-Jinhua Expressway in PRC. Connecting to Hangjinqu Expressway and Ningbo Loop Expressway, Ningbo-Jinhua Expressway is a branch line of the Shenyang-Haikou Expressway within the State expressway network. Jinhua Section of the Ningbo-Jinhua Expressway, under Jinhua Yongjin’s operation, is a dual four-lane expressway that begins at Chengzhou City and ends at the connection to Hangjinqu Expressway, with seven toll stations and a total length of approximately 69.7 km.

As this valuation exercise involves traffic and toll revenue forecasts of the subject toll road, we have considered and relied to a considerable extent on the traffic and revenue study (the “Traffic Study Report”) for Jinhua Section of Ningbo-Jinhua Expressway prepared by Wilbur Smith Associates (“Wilbur Smith”).

Based on the results of our investigation and analysis outlined in the report which follows, we are of the opinion that as at the Valuation Date, the market value of 100% equity interest in Zhejiang Jinhua Yongjin Expressway Co., Ltd. is reasonably stated at the amount of RMB1,026 million (RENMINBI ONE THOUSAND AND TWENTY SIX MILLION).

The following pages outline the factors considered, methodologies and assumptions employed in formulating our opinions and conclusions. All opinions are subject to the assumptions and limiting conditions contained therein.

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Introduction

This report has been prepared in accordance with the instructions from Zhejiang Expressway Co., Ltd. (“Zhejiang Expressway” or the “Company”) to express an independent opinion of the market value of 100% equity interest in Zhejiang Jinhua Yongjin Expressway Co., Ltd. (“Jinhua Yongjin” or the “Target Company”) as at 30 September 2012 (the “Valuation Date”). The report which follows is dated 19 March 2013 (the “Report Date”).

Purpose of Valuation

The scope of our work is to express an independent opinion of the market value of 100% equity interest in Jinhua Yongjin as at 30 September 2012, for the purpose of providing a circular reference for Zhejiang Expressway.

Basis of Value

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Basic of Opinion

The following factors form an integral part of our basis of opinion:

• The economic outlook in general;

• The nature of business and history of the operation concerned;

• The financial condition of Jinhua Yongjin;

• Projected development costs to expand and development time schedules;

• Projected operating costs and management expenses;

• Projected traffic flow, passenger volume and toll rates;

• Market-driven investment returns of companies engaged in similar lines of business;

• Financial and business risk of the business including continuity of income and the projected future results;

• Consideration and analysis on the micro and macro economy affecting the subject asset;

• Analysis on tactical planning, management standard and synergy of the subject asset; and

• Assessment of the leverage and liquidity of the subject asset.

We planned and performed our valuation so as to obtain all the information and explanations that we considered necessary in order to provide us with sufficient evidence to express our opinion on the Target Company.

BACKGROUND

Industry Background

Construction of expressways in China began in late 1980s, experienced an explosive growth in 1990s, and the network of expressways had been scheduled to be complete in 2020. During 2006 to 2010, the total length of expressways in PRC has increased steadily from 41,000 kilometers to 74,000 kilometers. Ending at 2012, the total length of PRC expressways was 98,000 kilometers. (Source: chinadr.com中國產業發展研究網)

46 APPENDIX I VALUATION REPORT

Table 1: Historical Development of expressway length in Mainland China

Historical Development of Expressway Length in Mainland China Year Distance (Kilometer) 1/1/1988 0 1/1/1989 147 km (91 mi) 1/1/1990 271 km (168 mi) 1/1/1991 522 km (324 mi) 1/1/1992 574 km (357 mi) 1/1/1993 652 km (405 mi) 1/1/1994 1,145 km (711 mi) 1/1/1995 1,603 km (996 mi) 1/1/1996 2,141 km (1,330 mi) 1/1/1997 3,422 km (2,126 mi) 1/1/1998 4,711 km (2,965 mi) 1/1/1999 8,733 km (5,426 mi) 1/1/2000 11,605 km (7,211 mi) 1/1/2001 16,314 km (10,137 mi) 1/1/2002 19,453 km (12,088 mi) 1/1/2003 25,200 km (15,700 mi) 1/1/2004 29,800 km (18,500 mi) 1/1/2005 34,300 km (21,300 mi) 1/1/2006 41,005 km (25,479 mi) 1/1/2007 45,339 km (28,172 mi) 1/1/2008 53,913 km (33,500 mi) 1/1/2009 60,436 km (37,553 mi) 1/1/2010 65,055 km (40,423 mi) 1/1/2011 74,113 km (46,052 mi) 1/1/2012 84,946 km (52,783 mi) 1/1/2013 98,364 km (61,121 mi)

Source: National Bureau of Statistics of China

The Expressway Network of China, also known as National Trunk Highway System (NTHS), is the longest Expressway system in the world. The main objective of the NTHS was to construct 12 high standard trunk roads: five longitudinal roads and seven latitudinal roads. 70% of the trunk roads are expressways.

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Figure 1: Map of National Trunk Highway System:

Source: The Transportation Planning and Research Institute, Ministry of Transport, and chinahighway.com

48 APPENDIX I VALUATION REPORT

However, the construction and management system of China expressways still lags behind the developed countries. Driven by the road economic development is the increased transportation flow in terms of passenger and cargo volumes. The requirement for the improvement of transportation efficiency and decrease of transportation cost has driven the continuous construction and development of China highways and expressways.

Company Background

Jinhua Yongjin was established in Zhejiang Province in the People’s Republic of China, as a limited liability company. The principal operation of the Target Company is to manage Jinhua Section of the Ninbo-Jinhua Expressway in PRC. Connecting to Hangjinqu Expressway and Ningbo Loop Expressway, the Ningbo-Jinhua Expressway is a branch line of the Shenyang-Haikou Expressway within the State expressway network. Jinhua Section of the Ningbo-Jinhua Expressway, under Jinhua Yongjin’s operation, is a dual four-lane expressway that begins at Chengzhou City and ends at the connection to Hangjinqu Expressway, with seven toll stations and a total length of approximately 69.7 km.

TRAFFIC AND REVENUE FORECAST

We have considered and relied to a considerable extent on the traffic and revenue study (the “Traffic Study Report”) for Jinhua Section of Ningbo-Jinhua Expressway prepared by Wilbur Smith Associates (“Wilbur Smith”), which presented a traffic study of the subject expressway.

We have joined the discussions about the key assumptions in the Traffic Study Report together with the management of Jinhua Yongjin, the Company and Wilbur Smith. We understand that Wilbur Smith is a professional expert with extensive experience in expressway industry and the underlying assumptions used in the Traffic Study Report are in line with industry practice, we are of the opinion that the assumptions adopted in that study are acceptable.

Wilbur Smith prepared a projection for the traffic flow and revenue with respect to the subject toll road covering the respective concession period. Their projection is mainly based on the expected annual GDP growth rate, vehicle types, existing road network and future transportation plan.

We believe that the traffic growth rate and the toll charge growth rate projected by Wilbur Smith are reasonable and, therefore, we have adopted their findings in developing the forecast for Jinhua Yongjin. The forecast period from Wilbur Smith is from 2012 to 2035. The operation of Jinhua Section of the Ningbo-Jinhua Expressway commenced in 2005, and the toll collection rights period commenced at the same time as the operation of Jinhua Section of the Ningbo-Jinhua Expressway commenced. It is assumed that the toll collection rights period of the Ningbo-Jinhua Expressway is 25 years and as at the Valuation Date of 30 September 2012 there are 19 years remaining of such toll collection rights period. Therefore, we adopted the forecast result from 2012 to 2030. Details are listed in the Major Assumptions section.

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Table 2: Sectional weighted average traffic by vehicle type on Jinhua Section of Ningbo- Jinhua Expressway

Passenger Passenger Passenger Year Truck 1 Truck 2 Truck 3 Truck 4 Truck 5 Truck 6 Truck 7 Total car 1 car 2 car 3 2012(R) 6979 319 206 1387 159 332 151 1225 35 1291 12085 2012(M) 6984 319 206 1389 158 334 151 1225 35 1290 12091 2013(2) 7514 339 224 1510 173 361 164 1324 39 1418 13065 2014 8190 369 244 1645 188 392 178 1433 42 1543 14224 2015 8914 401 264 1788 203 422 192 1541 45 1680 15450 2016(3) 9653 433 285 1934 219 454 207 1657 48 1815 16706 2017 10457 467 308 2092 236 489 223 1782 52 1960 18068 2018 11328 505 333 2263 255 527 239 1916 56 2117 19540 2019(4) 12645 555 369 2527 285 586 260 2118 60 2287 21692 2020 13699 600 398 2734 308 631 280 2278 64 2470 23461 2021 14444 631 420 2881 324 664 294 2396 67 2596 24716 2022 15229 663 442 3035 341 699 310 2520 71 2728 26039 2023 16056 698 466 3198 360 736 326 2651 74 2867 27432 2024 16929 734 492 3369 379 774 344 2788 78 3013 28900 2025 17850 772 518 3550 399 815 362 2933 82 3166 30447 2026 18460 797 535 3678 413 843 374 3031 84 3273 31488 2027 19091 823 553 3810 428 872 387 3131 87 3383 32565 2028 19744 850 572 3947 443 902 400 3236 89 3496 33679 2029 20471 878 591 4089 458 932 413 3343 92 3614 34883 2030 21163 907 611 4425 495 1004 445 3736 99 3899 36784 2031 21649 926 625 4662 522 1057 478 3930 104 4096 38049 2032 22145 953 639 4925 556 1135 503 4135 109 4302 39402 2033 22650 973 669 5189 585 1195 530 4316 114 4518 40739 2034 22923 990 682 5424 614 1251 552 4521 119 4703 41778 2035 23344 999 694 5683 635 1299 571 4692 124 4885 42926

Note:

(R) Actual traffic in 2012;

(M) Traffic for 2012 obtained from the traffic model and the opening of the Shaozhu Expressway was taken into account;

(2) The openings of the Dongyong Expressway, the Hangzhou Bay-Xiaoshan Channel, and the Hangzhou Bay-Shaoxing Channel were taken into account for 2013;

(3) The opening of the coastal expressway and expansion of the Hangjinqu Expressway were taken into account for 2016;

(4) The openings of the Hangshaotai Expressway and no.2 Hangzhou Loop Expressway were taken into account for 2019;

(5) The section flow includes free vehicles that account for 1%.

Source: Wilbur Smith Associates

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METHODOLOGY

In arriving at our assessed value, we have considered three generally accepted approaches, namely, market approach, cost approach and income approach.

Market Approach considers prices recently paid for similar assets, with adjustments made to market prices to reflect condition and utility of the appraised assets relative to the market comparative. Assets for which there is an established secondary market may be valued by this approach.

Benefits of using this approach include its simplicity, clarity, speed and the need for few or no assumptions. It also introduces objectivity in application as publicly available inputs are used. However, one has to be wary of the hidden assumptions in those inputs as there are inherent assumptions on the value of those comparable assets. It is also difficult to find comparable assets. Furthermore, this approach relies exclusively on the efficient market hypothesis.

Cost Approach considers the cost to reproduce or replace in new condition the assets appraised in accordance with current market prices for similar assets, with allowance for accrued depreciation or obsolescence present, whether arising from physical, functional or economic causes. The cost approach generally furnishes the most reliable indication of value for assets without a known secondary market.

Despite the simplicity and transparency of this approach, it does not directly incorporate information about the economic benefits contributed by the subject asset.

Income Approach is the conversion of expected periodic benefits of ownership into an indication of value. It is based on the principle that an informed buyer would pay no more for the project than an amount equal to the present worth of anticipated future benefits (income) from the same or a substantially similar project with a similar risk profile.

This approach allows for the prospective valuation of future profits and there are numerous empirical and theoretical justifications for the present value of expected future cash flows. However, this approach relies on numerous assumptions over a long time horizon and the result may be very sensitive to certain inputs. It also presents a single scenario only.

Selection of Valuation Approach and Methodology

Given the unique characteristics of the asset under valuation including the fact that the underlying expressway has unique economic circumstance, length of road and constructions, there are substantial limitations for the market approach and the cost approach for valuing the underlying asset. The market approach requires market transactions of comparable assets as an indication of value. Market transactions on expressway assets tend to have very different transaction prices considering a number of factors including geographical areas, toll rates and traffic, and operational stages and status of the expressway assets. We have not identified any current market transactions which are directly comparable. The cost approach does not directly incorporate information about the economic benefits contributed by the underlying asset. We have therefore relied solely on the income approach in determining our opinion of value.

In order to incorporate information about the economic benefits associated with the ownership of Jinhua Yongjin, we have relied on the income approach as the primary approach in determining our opinion of value.

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Through the application of income approach, the value of Jinhua Yongjin was developed through the application of discounted cash flow (DCF) method to devolve the future value of the business into a present fair value. This method eliminates the discrepancy in time value of money by using a discount rate to reflect all business risks including intrinsic and extrinsic uncertainties in relation to the business.

Under this method, value depends on the present worth of future economic benefits to be derived from the projected income, assuming no major change in the local Government policies and regulations. Indications of value have been developed by discounting projected future net cash flows available for payment of shareholders’ interest and the repayment of shareholder’s loans to their present worth at discount rates which in our opinion are appropriate for the risks of the business. In considering the appropriate discount rate to be applied, we have taken into account a number of factors including the current cost of finance and the potential risks inherent in toll road operation.

Based on the DCF model, we have used Free Cash Flow to Equity (FCFE) model in the valuation exercise, which is the cash available to stockholders, and is calculated as follows:

FCFE = NI + NCC + Net Borrowing – FCInv – WCInv

Where:

NI = Net Income NCC = Non-cash Charges (depreciation and amortization) FCInv = Fixed Capital Investment (total capital expenditures) WCInv = Working Capital Investments

We considered that the capital structure of Jinhua Yongjin will be relative stable with relatively stable forecasted net borrowings. Given such characteristics of Jinhua Yongjin, we are of the opinion that the FCFE model is appropriate to value Jinhua Yongjin.

INFORMATION AND DOCUMENTS

In conducting our valuation of Jinhua Yongjin, we have reviewed information from several sources, including but not limited to:

• Articles of incorporation of Jinhua Yongjin; • Business licence of Jinhua Yongjin; • The standards and documents of toll rates; • Financial information and forecast of Jinhua Yongjin; • Details and documents relating to the toll road; and • Traffic study report prepared by Wilbur Smith.

We conducted a site visit to Jinhua Yongjin, as well as interviews and discussions with Jinhua Yongjin’s senior management. We have relied to a considerable extent on information provided by the management in arriving at our opinion of value. We have also analysed the financial information and documents provided and conducted research using various sources.

MAJOR ASSUMPTION

Assumptions considered having significant effects in this valuation have been evaluated in arriving at our assessed value.

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General Assumptions

In determining the value of 100% equity interest in Jinhua Yongjin, we have made the following key assumptions. These assumptions have, where appropriate, been re-evaluated and validated in order to provide a more accurate and reasonable basis for our assessed value.

• We have assumed that the projected business can be achieved with the effort of the management of Jinhua Yongjin;

• In order to realize the growth potential of the business and maintain a competitive edge, additional manpower, equipment and facilities are necessary to be employed.

• We have assumed that there will be no material change in the existing political, legal, technological, fiscal or economic conditions, which might adversely affect the business of Jinhua Yongjin;

• We have assumed that the operational and contractual terms stipulated in the relevant contracts and agreements will be honored;

• We have been provided with copies of the operating licenses and company incorporation documents. We have assumed such information to be reliable and legitimate. We have relied to a considerable extent on such information provided in arriving at our opinion of value;

• Natural weather can have an impact on toll roads, including flooding and other types of inclement weather. We have assumed that no extended closure will occur;

• We have assumed the accuracy of the financial and operational information provided to us by Jinhua Yongjin and relied to a considerable extent on such information in arriving at our opinion of value;

• We have assumed share capital injection and shareholder loan when necessary in the valuation.

• We have assumed that there are no hidden or unexpected conditions associated with the assets valued that might adversely affect the reported value. Further, we assume no responsibility for changes in market conditions after the Valuation Date.

Major Assumptions

Our valuation is mainly based on the projections provided by Jinhua Yongjin, we have conducted industry analysis of comparable companies, by comparing with the information of other peer expressway groups in the industry, which information include, but is not limited to: revenue growth rate, margin analysis, cost growth rate, interest expense, and the depreciation method etc. We did time series analysis as well, with historical actual performance as the starting point. The analysis results show that the forecast provided by Jinhua Yongjin is reasonable and within the range of comparable companies.

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Jinhua Yongjin is a party to each of the Ancillary Agreements with subsidiaries of Communications Group. The Agreements include the Service Area Operation Agreement, the Maintenance Work Agreement, the Service Area Utilities Services Agreement, and the Road Clearance and Emergency Service Agreement. Upon completion of the Communications Group Agreement, Jinhua Yongjin will enter into the New Ancillary Agreements in replacement of the respective existing Ancillary Agreements (other than the Maintenance Work Agreement which will continue and the Road Clearance and Emergency Service Agreement which will terminate). By virtue of the counterparties of each of the New Ancillary Agreements and the Maintenance Work Agreement being subsidiaries (and hence associates) of Communications Group, the New Ancillary Agreements and the Maintenance Work Agreement will each constitute a continuing connected transaction for the Company under Chapter 14A of the Listing Rules.

Our valuation report has considered the Ancillary Agreements and has reflected its impact in the profit and loss forecast and valuation result.

Traffic and Toll Revenue Forecast

In determining the projected revenue from Jinhua Section of Ningbo-Jinhua Expressway, we have made reference to the Traffic Study Report prepared by Wilbur Smith. The forecast traffic volume and toll revenue prepared by Wilbur Smith has been used to estimate the revenue of Jinhua Section of Ningbo- Jinhua Expressway.

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Table 3: Revenue forecast for Jinhua section of Ningbo-Jinhua Expressway (RMB’ 10,000)

Average daily Annual revenue Year Annual growth rate revenue (in RMB10,000) 2012(R) ¥632,462 ¥23,148 2012(M) ¥632,581 ¥23,152 2013(2) ¥671,790 ¥24,520 5.91% 2014 ¥730,467 ¥26,662 8.73% 2015 ¥791,809 ¥28,901 8.40% 2016(3) ¥855,000 ¥31,293 8.28% 2017 ¥923,362 ¥33,703 7.70% 2018 ¥997,184 ¥36,397 7.99% 2019(4) ¥1,102,859 ¥40,254 10.60% 2020 ¥1,191,082 ¥43,594 8.30% 2021 ¥1,254,116 ¥45,775 5.00% 2022 ¥1,320,491 ¥48,198 5.29% 2023 ¥1,390,371 ¥50,749 5.29% 2024 ¥1,463,948 ¥53,580 5.58% 2025 ¥1,541,422 ¥56,262 5.00% 2026 ¥1,593,841 ¥58,175 3.40% 2027 ¥1,648,052 ¥60,154 3.40% 2028 ¥1,704,108 ¥62,370 3.68% 2029 ¥1,763,670 ¥64,374 3.21% 2030 ¥1,885,884 ¥68,835 6.93% 2031 ¥1,963,151 ¥71,655 4.10% 2032 ¥2,046,446 ¥74,900 4.53% 2033 ¥2,126,948 ¥77,634 3.65% 2034 ¥2,196,990 ¥80,190 3.29% 2035 ¥2,266,169 ¥82,715 3.15%

Source: Wilbur Smith Associates

The total revenue of Jinhua Yongjin also includes the service area operation revenue, beside the toll revenue forecasted by Wilbur Smith.

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Table 4: Total Revenue forecast for Jinhua Yongjin (RMB)

Revenue (RMB) 2012.(10-12)E 2013E 2014E 2015E 2016E 2017E 2018E Toll Revenue 59,837,040 245,200,000 266,620,000 289,010,000 312,930,000 337,030,000 363,970,000 Growth rate 6% 9% 8% 8% 8% 8% Service Area Revenue 244,936 3,192,000 3,232,000 3,300,600 3,320,600 3,340,600 3,390,630 Growth rate 3% 1% 2% 1% 1% 1% Total Revenue 60,081,976 248,392,000 269,852,000 292,310,600 316,250,600 340,370,600 367,360,630 Growth rate 6% 9% 8% 8% 8% 8% Revenue (RMB) 2019E 2020E 2021E 2022E 2023E 2024E 2025E Toll Revenue 402,540,000 435,940,000 457,750,000 481,980,000 507,490,000 535,800,000 562,620,000 Growth rate 11% 8% 5% 5% 5% 6% 5% Service Area Revenue 3,410,630 3,430,630 3,482,162 3,502,162 3,522,162 3,565,270 3,585,270 Growth rate 1% 1% 2% 1% 1% 1% 1% Total Revenue 405,950,630 439,370,630 461,232,162 485,482,162 511,012,162 539,365,270 566,205,270 Growth rate 11% 8% 5% 5% 5% 6% 5% Revenue (RMB) 2026E 2027E 2028E 2029E 2030E Toll Revenue 581,750,000 601,540,000 623,700,000 643,740,000 688,350,000 Growth rate 3% 3% 4% 3% 7% Service Area Revenue 3,605,270 3,660,033 3,680,033 3,700,033 3,720,033 Growth rate 1% 2% 1% 1% 1% Total Revenue 585,355,270 605,200,033 627,380,033 647,440,033 692,070,033 Growth rate 3% 3% 4% 3% 7%

Depreciation

Referenced to the management of Jinhua Yongjin, the depreciation method has been provided as below:

• Road and Structures: traffic volume method, depreciation period of 25 years, residual value of 0%;

• Buildings and Structures: unit-of-usage method, depreciation period of 26 years, residual value of 5%;

• Special Equipment’s: unit-of-usage method, depreciation period of 10 years, residual value of 5%;

• Transportation Facilities: unit-of-usage method, depreciation period of 8 years, residual value of 5%;

• General Facilities: unit-of-usage method, depreciation period of 5 years, residual value of 5%.

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Cost of Goods Sold

Cost of goods sold was forecasted based on the historical average of principal business costs related to the maintenance of road, including operating cost, road maintenance cost, system maintenance cost, and other related cost provided by Jinhua Yonjin. Each component of the cost of goods sold was projected to be a declining percentage of Jinhua Yongjin’s annual revenue based on the assumption that Jinhua Yongjin’s revenue will increase while the monetary amount of each component of the cost of goods sold will remain relatively stable.

Based on the information provided by Jinhua Yongjin, depreciation and amortization is used to account for the cost of road construction and maintenance systems over the span of the life. Operating Cost includes employment related cost, and other operating costs. Operating Cost was forecasted by Jinhua Yongjin based on historical performance, which on average was 15.56% as of revenue. The percentage of operating cost as of total revenue is forecasted by the Company to be 15% for the first three years, and gradually declined to 13% based on consideration of the increased revenues and relatively stable operating cost during the forecasted period

Road maintenance cost refers to the daily road construction maintenance cost, the special equipment maintenance cost, and other road related maintenance cost. Road maintenance cost was also forecasted by Jinhua Yongjin based on historical data. Based on the historical operation data for the nine months from January 2012 to September 2012 and according to the road maintenance plan provided by the management of Jinhua Yongjin, the road maintenance cost was forecasted to be 11% of total revenue of Jinhua Yongjin for the full-year 2012. According to the road maintenance plan provided by the management of Jinhua Yongin and due to the winter weather conditions in the fourth quarter which are less suitable for carrying out road maintenance work of Jinhua Section of the Ningbo-Jinhua Expressway, the road maintenance cost for the three months from October 2012 to December 2012 was forecasted to be 8% of total revenue of Jinhua Yongjin for the same period. The road maintenance cost was forecasted to decline gradually from 9.1% in 2013 to 6% in 2030 taking into consideration to the forecasted increased revenues and the expressway entering into a stable stage.

System maintenance cost includes the maintenance cost for three basic expressway systems (the monitor system, the toll collection system, and the communication system), the electromechanical system, and other special equipment cost of the electromechanical system. System maintenance cost was forecasted by Jinhua Yongjin based on the historical performance, which accounted for 2% to 3% of total revenue. The cost was forecasted to be 2% of revenue for the first 7 years, and 1% of revenue for the remaining years.

The table below shows the detail information of cost of goods sale.

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Table 5: The Cost of Goods Sold of Jinhua Yongjin (RMB)

COGS (RMB) 2012.(10-12)E 2013E 2014E 2015E 2016E 2017E 2018E Depr & Amort 19,681,769 88,571,732 92,351,673 95,769,829 100,080,246 98,678,160 98,384,834 As of Revenue 33% 36% 35% 33% 32% 29% 27% Operating Cost 7,876,514 37,882,270 40,040,650 42,344,636 44,783,234 47,386,067 50,143,417 Growth Rate 6% 6% 6% 6% 6% 6% As of Revenue 13% 15% 15% 15% 14% 14% 14% Road maintenance cost 4,933,167 22,675,535 23,582,557 24,525,859 25,506,893 26,527,169 27,588,256 As of Revenue 8% 9.1% 8.8% 8.5% 8.2% 7.9% 7.6% System maintenance cost 1,153,092 4,908,949 5,073,307 5,244,239 5,222,009 5,406,889 5,623,165 As of Revenue 2% 2% 2% 2% 2% 2% 2% Other related Cost 281,944 1,947,632 1,947,632 1,947,632 1,947,632 1,947,632 1,947,632 As of Revenue 0% 1% 1% 1% 1% 1% 1% Total COGS 33,926,485 155,986,118 162,995,819 169,832,195 177,540,015 179,945,918 183,687,304 As of Revenue 56% 63% 60% 58% 56% 53% 50% GP margin 40% 34% 36% 39% 40% 44% 47% COGS (RMB) 2019E 2020E 2021E 2022E 2023E 2024E 2025E Depr & Amort 103,336,748 108,288,662 112,521,514 116,744,991 121,447,530 126,150,069 130,377,608 As of Revenue 26% 25% 25% 24% 24% 24% 23% Operating Cost 52,732,856 55,453,593 58,333,683 61,361,653 64,566,527 67,937,859 71,004,439 Growth Rate 5% 5% 5% 5% 5% 5% 5% As of Revenue 13% 13% 13% 13% 13% 13% 13% Road maintenance cost 28,691,786 29,839,457 31,033,036 32,036,889 33,073,773 34,144,795 35,251,099 As of Revenue 7.1% 6.8% 6.8% 6.6% 6.5% 6.4% 6.3% System maintenance cost 5,848,091 6,082,015 6,325,296 6,578,307 6,841,440 7,115,097 7,399,701 As of Revenue 1% 1% 1% 1% 1% 1% 1% Other related Cost 1,947,632 1,947,632 1,947,632 1,947,632 1,947,632 1,947,632 1,947,632 As of Revenue 0% 0% 0% 0% 0% 0% 0% Total COGS 192,557,114 201,611,360 210,161,161 218,669,472 227,876,902 237,295,452 245,980,479 As of Revenue 47% 46% 46% 45% 45% 44% 43% GP margin 49% 51% 51% 52% 52% 53% 53% COGS (RMB) 2026E 2027E 2028E 2029E 2030E Depr & Amort 134,605,147 138,832,686 143,060,225 147,287,764 147,256,924 As of Revenue 23% 23% 23% 23% 21% Operating Cost 74,203,149 77,560,759 81,064,368 84,741,419 88,579,718 Growth Rate 5% 5% 5% 5% 5% As of Revenue 13% 13% 13% 13% 13% Road maintenance cost 36,393,871 37,574,336 38,793,760 40,053,455 41,354,776 As of Revenue 6.3% 6.2% 6.2% 6.2% 6.0% System maintenance cost 7,695,689 8,003,517 8,323,658 8,656,604 9,002,868 As of Revenue 1% 1% 1% 1% 1% Other related Cost 1,947,632 1,947,632 1,947,632 1,947,632 1,947,632 As of Revenue 0% 0% 0% 0% 0% Total COGS 254,845,488 263,918,929 273,189,642 282,686,874 288,141,918 As of Revenue 44% 44% 44% 44% 42% GP margin 53% 53% 53% 53% 55%

58 APPENDIX I VALUATION REPORT

Total Operating Expenses

Total operating expenses include selling expenses and administrative expenses, which include employee, administration, and depreciation and amortization fees.

Based on the historical information provided by the management of Jinhua Yongjin in relation to Jinhua Yongjin’s operating expenses, the selling expense was forecasted to be zero, and the administrative expenses was forecasted to be 2% of Jinhua Yongjin’s annual revenue from 2012 to 2016 and 1% of Jinhua Yongjin’s annual revenue from 2017 to 2030.

Table 6: The Total Operating Expenses of Jinhua Yongjin (RMB)

Total Operating Expense (RMB) 2012.(10-12)E 2013E 2014E 2015E 2016E 2017E 2018E Selling expense – – – – – – – as % of total revenue 0% 0% 0% 0% 0% 0% 0% Administrative expenses 1,286,767 4,869,391 4,911,292 4,955,289 5,001,486 5,049,992 5,100,924 Growth Rate 2% 1% 1% 1% 1% 1% as % of total revenue 2% 2% 2% 2% 2% 1% 1% Total Operating Expense 1,286,767 4,869,391 4,911,292 4,955,289 5,001,486 5,049,992 5,100,924 Total Operating Expense (RMB) 2019E 2020E 2021E 2022E 2023E 2024E 2025E Selling expense – – – – – – – as % of total revenue 0% 0% 0% 0% 0% 0% 0% Administrative expenses 5,154,402 5,210,554 5,269,514 5,331,422 5,396,425 5,464,679 5,536,345 Growth Rate 1% 1% 1% 1% 1% 1% 1% as % of total revenue 1% 1% 1% 1% 1% 1% 1% Total Operating Expense 5,154,402 5,210,554 5,269,514 5,331,422 5,396,425 5,464,679 5,536,345 Total Operating Expense (RMB) 2026E 2027E 2028E 2029E 2030E Selling expense – – – – – as % of total revenue 0% 0% 0% 0% 0% Administrative expenses 5,611,594 5,690,606 5,773,569 5,860,679 5,952,145 Growth Rate 1% 1% 1% 2% 2% as % of total revenue 1% 1% 1% 1% 1% Total Operating Expense 5,611,594 5,690,606 5,773,569 5,860,679 5,952,145

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Bank Loan and Financial Expenses

The repayment schedule was prepared by the management of Jinhua Yongjin and referred to repayment terms of its loan contracts.

According to the capital structure of the Target Company, the bank loan is RMB1,422,000,000. The interest expenses are calculated based on the long term borrowing rate of the loan agreements. With reference to the opinion of the management of the Target Company, the interest expenses and principal repayment schedule are shown as follows:

Table 7: Interest Expenses and Principal Repayment Schedule of Jinhua Yongjin (RMB)

Creditors Loan balance at 2012 End Interest Rate (RMB) CCB, ICBC, CIB 105,000,000 5.895% ICBC 9,000,000 5.760% Financial Center 20,000,000 6.150% Zhejiang Expressway Co., Ltd. 8,200,000 6.150% Total 142,200,000

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Principal Repayment Schedule Year 2012-2018

2012 2013 2014 2015 2016 2017 2018 CCB, ICBC, CIB Loan 5.895% Beginning Loan Balance 1,050,000,000 980,000,000 910,000,000 900,000,000 800,000,000 700,000,000 New Borrowing – – – – – – Payment -70,000,000 -70,000,000 -10,000,000 -100,000,000 -100,000,000 -100,000,000 Ending Loan Balance 980,000,000 910,000,000 900,000,000 800,000,000 700,000,000 600,000,000 Financial Expense 1 59,834,250 55,707,750 53,349,750 50,107,500 44,212,500 38,317,500 ICBC Loan 5.760% Beginning Loan Balance 90,000,000 90,000,000 90,000,000 – – – New Borrowing – – – – – – Payment – – -90,000,000 – – – Ending Loan Balance 90,000,000 90,000,000 – – – – Financial Expense 2 5,184,000 5,184,000 2,592,000 – – – Financial Center 6.15% Beginning Loan Balance 200,000,000 200,000,000 200,000,000 200,000,000 200,000,000 200,000,000 New Borrowing – – – – – – Payment – – – – – – Ending Loan Balance 200,000,000 200,000,000 200,000,000 200,000,000 200,000,000 200,000,000 Financial Expense 3 12,300,000 12,300,000 12,300,000 12,300,000 12,300,000 12,300,000 Zhejiang Expressway Co., Ltd. 6.15% Beginning Loan Balance 82,000,000 82,000,000 82,000,000 82,000,000 82,000,000 82,000,000 New Borrowing – – – – – – Payment – – – – – – Ending Loan Balance 82,000,000 82,000,000 82,000,000 82,000,000 82,000,000 82,000,000 Financial Expense 4 5,043,000 5,043,000 5,043,000 5,043,000 5,043,000 5,043,000

New Borrowing – – – – – – Payment -50,000,000 -70,000,000 -70,000,000 -100,000,000 -100,000,000 -100,000,000 -100,000,000 Ending Loan Balance 1,422,000,000 1,352,000,000 1,282,000,000 1,182,000,000 1,082,000,000 982,000,000 882,000,000 Total Financial Expenses 90,803,100 82,361,250 78,234,750 73,284,750 67,450,500 61,555,500 55,660,500

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Principal Repayment Schedule Year 2019-2025

2019 2020 2021 2022 2023 2024 2025 CCB, ICBC, CIB Loan Beginning Loan Balance 600,000,000 500,000,000 400,000,000 300,000,000 200,000,000 100,000,000 – New Borrowing – – – – – – – Payment -100,000,000 -100,000,000 -100,000,000 -100,000,000 -100,000,000 -100,000,000 – Ending Loan Balance 500,000,000 400,000,000 300,000,000 200,000,000 100,000,000 – – Financial Expense 1 32,422,500 26,527,500 20,632,500 14,737,500 8,842,500 2,947,500 – ICBC Loan Beginning Loan Balance – – – – – – – New Borrowing – – – – – – – Payment – – – – – – – Ending Loan Balance – – – – – – – Financial Expense 2 – – – – – – – Financial Center Beginning Loan Balance 200,000,000 200,000,000 200,000,000 200,000,000 200,000,000 200,000,000 200,000,000 New Borrowing – – – – – – – Payment – – – – – -50,000,000 Ending Loan Balance 200,000,000 200,000,000 200,000,000 200,000,000 200,000,000 200,000,000 150,000,000 Financial Expense 3 12,300,000 12,300,000 12,300,000 12,300,000 12,300,000 12,300,000 10,762,500 Zhejiang Expressway Co., Ltd. Beginning Loan Balance 82,000,000 82,000,000 82,000,000 82,000,000 82,000,000 82,000,000 82,000,000 New Borrowing – – – – – – – Payment – – – – – – Ending Loan Balance 82,000,000 82,000,000 82,000,000 82,000,000 82,000,000 82,000,000 82,000,000 Financial Expense 4 5,043,000 5,043,000 5,043,000 5,043,000 5,043,000 5,043,000 5,043,000

New Borrowing – – – – – – – Payment -100,000,000 -100,000,000 -100,000,000 -100,000,000 -100,000,000 -100,000,000 -50,000,000 Ending Loan Balance 782,000,000 682,000,000 582,000,000 482,000,000 382,000,000 282,000,000 232,000,000 Total Financial Expenses 49,765,500 43,870,500 37,975,500 32,080,500 26,185,500 20,290,500 15,805,500

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Principal Repayment Schedule Year 2026-2030

2026 2027 2028 2029 2030 CCB, ICBC, CIB Loan Beginning Loan Balance – – – – – New Borrowing – – – – – Payment – – – – – Ending Loan Balance – – – – – Financial Expense 1 – – – – – ICBC Loan Beginning Loan Balance – – – – – New Borrowing – – – – – Payment – – – – – Ending Loan Balance – – – – – Financial Expense 2 – – – – – Financial Center Beginning Loan Balance 150,000,000 100,000,000 50,000,000 – – New Borrowing – – – – – Payment -50,000,000 -50,000,000 -50,000,000 – – Ending Loan Balance 100,000,000 50,000,000 – – – Financial Expense 3 7,687,500 4,612,500 1,537,500 – – Zhejiang Expressway Co., Ltd. Beginning Loan Balance 82,000,000 82,000,000 82,000,000 82,000,000 New Borrowing – – – – – Payment – – -82,000,000 – Ending Loan Balance 82,000,000 82,000,000 82,000,000 – – Financial Expense 4 5,043,000 5,043,000 5,043,000 2,521,500 –

New Borrowing – – – – – Payment -50,000,000 -50,000,000 -50,000,000 -82,000,000 – Ending Loan Balance 182,000,000 132,000,000 82,000,000 – – Total Financial Expenses 12,730,500 9,655,500 6,580,500 2,251,500 –

The total financial expenses include interest expenses based on the repayment schedule provided by the management of Jinhua Yongjin, the interest income as forecasted to be 2.1% of total revenue based on historical interest income records and the opinion of the management of Jinhua Yongjin.

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Table 8: Financial Expenses of Jinhua Yongjin (RMB)

Financial expenses (RMB) 2012.(10-12)E 2013E 2014E 2015E 2016E 2017E 2018E Interest Income 896,943 5,216,232 5,666,892 6,138,523 6,641,263 7,147,783 7,714,573 Interest Expenses 21,392,375 82,361,250 78,234,750 73,284,750 67,450,500 61,555,500 55,660,500 Financial Fees 103,181 124,196 134,926 146,155 158,125 170,185 183,680 Financial expenses 20,598,612 77,269,214 72,702,784 67,292,383 60,967,363 54,577,903 48,129,607 % of total revenue 34% 31% 27% 23% 19% 16% 13% Financial expenses (RMB) 2019E 2020E 2021E 2022E 202lE 2024E 2025E Interest Income 8,524,963 9,226,783 9,685,875 10,195,125 10,731,255 11,326,671 11,890,311 Interest Expenses 49,765,500 43,870,500 37,975,500 32,080,500 26,185,500 20,290,500 15,805,500 Financial Fees 202,975 219,685 230,616 242,741 255,506 269,683 283,103 Financial expenses 41,443,512 34,863,402 28,520,241 22,128,116 15,709,751 9,233,512 4,198,292 % of total revenue 10% 8% 6% 5% 3% 2% 1% Financial expenses (RMB) 2026E 2027E 2028E 2029E 2030E Interest Income 12,292,461 12,709,201 13,174,981 13,596,241 14,533,471 Interest Expenses 12,730,500 9,655,500 6,580,500 2,521,500 – Financial Fees 292,678 302,600 313,690 323,720 346,035 Financial expenses 730,717 (2,751,101) (6,280,791) (10,751,021) (14,187,436) % of total revenue 0% 0% -1% -2% -2%

Taxation

The effective income tax rate, based on the information provided by the management of Jinhua Yongjin, is assumed to be 25%. Based on the discussion with the management of Jinhua Yongjin, considered the income loss carrying forward in previous years, the Target Company is assumed to pay tax starting from 2017. Based on the information provided by Jinhua Yongjin, the business tax includes (local) education supplementary tax, construction tax, and fees etc. As discussed with the management of Jinhua Yongjin, the total business tax was forecasted to be 3.4% as of total revenue.

Working Capital

Based on discussion with the management of Jinhua Yongjin and industry analysis, the majority of expressway companies’ working capital investments are normally incurred in the early stage of their operations during the construction of the expressways. After the expressways are constructed and start to operate, there would normally be minimal requirements for additional working capital investment. As disclosed in the table below, the amount of working capital for most of the comparable companies is negative from 2010 to 2012. In addition, as shown in the same table, the amount of working capital of Jinhua Yongjin remains negative from 2009 to 2012. Based on such information, the additional requirement for working capital of Jinhua Yongjin in the forecast period will be limited and insignificant.

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Table 9: Working Capital of Comparable Companies

Comparable Companies Ticker 2009 2010 2011 2012 Zhejiang Expressway Co., Ltd. 0576 HK (12,082.4) (12,111.2) (7,385.8) (7,774.9) Anhui Expressway Company Limited 0995 HK (520.8) (342.7) (430.0) (558.7) Sichuan Expressway Company Limited 0107 HK 20.6 (96.7) 677.7 (1,026.0) Shenzhen Expressway 548 HK 180.2 (1,226.6) (587.6) (273.0) Jiangsu Expressway Company Limited 0177 HK 89.2 872.7 1,659.2 1,679.7 Subject Company Jinhua Yon (71.82) (20.91) (32.19) (41.01)

Source: Bloomberg

Based on the historical performance of Jinhua Yongjin and research on the expressway industry, the management of Jinhua Yongjin is of the opinion that the additional requirement for working capital in the forecast period is limited and insignificant.

NET PPE

The net PPE was calculated based on the capital expenses forecasted by the management of Jinhua Yongjin and the according depreciation and amortization, calculated based on the depreciation and amortization method provided by the management of Jinhua Yongjin.

Table 10: Net PPE of Jinhua Yongjin (RMB)

Net PPE (RMB) 2012.(10-12)E 2013E 2014E 2015E 2016E 2017E 2018E Beginning Balance 2.090,964,491 2,071,585,123 1,990,086,921 1,898,708,777 1,805,412,477 1,707,805,760 1,612,601,129 Capex 1,700,000 10,700,000 4,600,000 6,100,000 6,100,000 7,100,000 7,100,000 Depreciation & Amortization 21,079,367 92,198,203 95,978,144 99,396,300 103,706,717 102,304,631 102,011,305 Ending Balance (Net PPE) 2,071,585,123 1,990,086,921 1,898,708,777 1,805,412,477 1,707,805,760 1,612,601,129 1,517,689,824 Net PPE (RMB) 2019E 2020E 2021E 2022E 202lE 2024E 2025E Beginning Balance 1,517,689,824 1,423,826,605 1,325,011,472 1,214,963,488 1,100,692,026 986,718,026 868,041,487 Capex 13,100,000 13,100,000 6,100,000 6,100,000 11,100,000 11,100,000 6,100,000 Depreciation & Amortization 106,963,219 111,915,133 116,147,985 120,371,461 125,074,000 129,776,539 134,004,079 Ending Balance (Net PPE) 1,423,826,605 1,325,011,472 1,214,963,488 1,100,692,026 986,718,026 868,041,487 740,137,408 Net PPE (RMB) 2026E 2027E 2028E 2029E 2030E Beginning Balance 740,137,408 608,005,790 471,646,634 331,059,938 186,245,703 Capex 6,100,000 6.100,000 6,100,000 6,100,000 4,600,000 Depreciation & Amortization 138,231,618 142,459,157 146,686,696 150,914,235 150,883,395 Ending Balance (Net PPE) 608,005,790 471,646,634 331,059,938 186,245,703 39,962,309

CAPITAL EXPENSE

Capex is forecasted by the management of Jinhua Yongjin from 2013 to 2030. Due to the particularity of expressway industry, massive investments have been invested in road, structures and buildings at the very beginning, therefore the Capex in forecast period is not much and mainly are special equipment required by road maintenance.

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Table 11: Capex of Jinhua Yongjin (RMB)

RMB 2012.(09-12) 2013 2014 2015 2016 2017 2018 Total Capex 1,700,000 10,700,000 4,600,000 6,100,000 6,100,000 7,100,000 7,100,000 Road and Structures – – – – Buildings – Special Equipments 1,500,000 9,600,000 3,500,000 5,000,000 5,000,000 6,000,000 6,000,000 Transportaion Equipments 200,000 500,000 500,000 500,000 500,000 500,000 500,000 General Equipments – 600,000 600,000 600,000 600,000 600,000 600,000 RMB 2019 2020 2021 2022 2023 2024 2025 Total Capex 13,100,000 13,100,000 5,100,000 6,100,000 11,100,000 11,100,000 6,100,000 Road and Structures Buildings Special Equipments 12,000,000 12,000,000 5,000,000 5,000,000 10,000,000 10,000,000 5,000,000 Transportaion Equipments 500,000 500,000 500,000 500,000 500,000 500,000 500,000 General Equipments 600,000 600,000 600,000 600,000 600,000 600,000 600,000 RMB 2026 2027 2028 2029 2030 Total Capex 6,100,000 6,100,000 6,100,000 6,100,000 4,600,000 Road and Structures Buildings Special Equipments 5,000,000 5,000,000 5,000,000 5,000,000 3,500,000 Transportaion Equipments 500,000 500,000 500,000 500,000 500,000 General Equipments 600,000 600,000 600,000 600,000 600,000

EBITDA

Based on the projections provided by Jinhua Yongjin, the calculated EBITDA and EBIDA margin in the forecast period gradually increases from RMB171.32 million and 69% in 2013 to RMB525.52 million and 76% in 2030, which is mainly benefiting from the revenue growth and corresponding scale effect.

Table 12: EBITDA of Jinhua Yongjin (RMB)

EBITDA (RMB) 2012.(10-12) 2013 2014 2015 2016 2017 2018 EBITDA 43,927,708 171,317,222 188,783,608 207,023,846 226,715,415 246,168,000 266,164,440 EBITDA margin (%) 73% 69% 70% 71% 72% 72% 73% EBITDA (RMB) 2019 2020 2021 2022 2023 2024 2025 EBITDA 301,485,994 329,624,149 346,374,070 365,462,079 385,563,930 408,179,143 429,587,717 EBITDA margin (%) 74% 75% 75% 75% 75% 76% 76% EBITDA (RMB) 2026 2027 2028 2029 2030 EBITDA 443,381,110 457,632,949 473,941,116 487,969,849 525,522,482 EBITDA margin (%) 76% 76% 76% 75% 76%

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ACCOUNTS PAYABLE

Accounts Payable with amount of around RMB30.82 million is the payables to contractors stated in the balance sheet as of Valuation Date. As introduced by the management of Jinhua Yongjin, this item will be paid off in 2013 and 2014 respectively.

Table 13: Accounts Payable of Jinhua Yongjin (RMB)

Accounts Payable (RMB) 2012.(10-12)E 2013E 2014E 2015E 2016E 2017E 2018E Accounts Payable 30,822,748 15,800,000 15,000,000 – – – – Accounts Payable (RMB) 2019E 2020E 2021E 2022E 2023E 2024E 2025E Accounts Payable – – – – – – – Accounts Payable (RMB) 2026E 2027E 2028E 2029E 2030E Accounts Payable – – – – – – –

NON-OPERATING EXPENSES

Based on the discussion with the management of Jinhua Yongjin, the non-operating expenses for mature expressway companies are minimal because the non-operating revenue and expense are traded off each other. Based on the forecast provided by the management of Jinhua Yongjin, there would be one non-operating expense, the expense of water conservancy project, with amount of around RMB0.32 million in the forecast period.

Table 14: Non-operating expense of Jinhua Yongjin (RMB)

Non-operating revenue & 2012.(10-12)E 2013E 2014E 2015E 2016E 2017E 2018E expense (RMB) Non-operating revenue – – – – – – – Non-operating expense 1,713,293 248,392 269,852 292,311 316,251 316,251 316,251 Non-operating revenue & 2019E 2020E 2021E 2022E 2023E 2024E 2025E expense (RMB) Non-operating revenue – – – – – – – Non-operating expense 316,251 316,251 316,251 316,251 316,251 316,251 316,251 Non-operating revenue & 2026E 2027E 2028E 2029E 2030E expense (RMB) Non-operating revenue – – – – – Non-operating expense 316,251 316,251 316,251 316,251 316,251

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NON-OPERATING ASSETS

Non-operating assets refers to classes of assets that are not essential to the on-going operations of a business, but may still generate income or provide a return on investment. In the Valuation Report, the non-operating assets include excess cash and other excess assets. As of the Valuation Date, there was no excess cash on the balance sheet of Jinhua Yongjin based on the discussions with the management of Jinhua Yongjin. There were other receivables on the balance sheet of Jinhua Yongjin of approximately RMB2.4 million that were not operating assets as of the Valuation Date and Jinhua Yongjin owns an office building the value of which was estimated to be approximately RMB36 million. The non-operating assets in the Valuation Report represent the aggregate value of these two items. In addition, there were other current liabilities on the balance sheet of Jinhua Yongjin of approximately RMB6 million as of the Valuation Date, that were considered non-operating liabilities based on discussion with the management of Jinhua Yongjin.

Table 15: Non-operating assets of Jinhua Yongjin (RMB)

Non-operating asset (RMB) 9/30/2012 Cash Balance 25,680,880 Operating Cash 25,680,880 Dividend Payable – Excess Cash – Other excess asset 38,791,662 Other receivable 2,417,462 Investment property 36,374,200 Other excess liability 6,069,675 Other current liability 6,069,675 Non-operating asset 32,721,988

DISCOUNT RATE

In applying the discounted cash flow method, it is necessary to determine an appropriate discount rate for the assets under review. The discount rate represents an estimate of the rate of return required by a third party investor for an investment of this type. Risk factors relevant in our selection of an appropriate discount rate include:

1. Interest rate risk, which measures variability of returns caused by changes in the general level of interest rates.

2. Purchasing power risk, which measures loss of purchasing power over time due to inflation.

3. Liquidity risk, which measures the ease with which an instrument can be sold at the prevailing market price.

4. Market risk, which measures the effects of the general market on the price behavior of securities.

5. Business risk, which measures the uncertainty inherent in projections of operating income.

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Consideration of risk, burden of management, degree of liquidity, and other factors affect the rate of return acceptable to a given investor in a specific investment. An adjustment for risk is an increment added to a base or safe rate to compensate for the extent of risk believed involved in the investment.

Required Return on Equity Capital

We have used Capital Assets Pricing Model (the “CAPM”) to estimate the required return on equity capital.

The CAPM is a fundamental tenet of modern portfolio theory which has been a generally accepted basis for marketplace valuations of equity capital. The CAPM technique is widely accepted in the investment and financial analysis communities for the purpose of estimating a company’s required return on equity capital.

The equation of CAPM is shown as follows:

Expected Required Return on Equity = Risk Free + Nominal Beta (β) x Risk Premium +ε

The return on equity required of a company represents the total rate of return investors expect to earn, through a combination of dividends and capital appreciation, as a reward for risk taking. The CAPM is used to calculate the required rate of return on equity investment by using publicly-traded companies.

Parameters for CAPM

In determining the equity discount rates for Jinhua Yongjin, the following parameters have been used as at the Valuation Date:

HK Market 0.76% Risk Free Rate≈ Source from Bloomberg, HK 10yr risk free rate 7.86% Market Return≈ Source from Bloomberg, 11 Year HK HANG SENG Index 0.90 Estimated Beta≈ Weighted average beta of listed comparable companies in similar industries CAPM≈ 7.12%

In determining the beta, we have considered the information of certain listed comparable companies in Hong Kong which are engaged in the business of operating expressways in China, including Sichuan Expressway Co., Ltd, Jiangsu Expressway Co., Ltd., Zhejiang Expressway Co., Ltd., and Anhui Expressway Co., Ltd.

The selection of comparable beta is based on the selected comparable companies, which are expressway companies listed in HK while operating in mainland China, and with relatively long term operating business. The following table shows the beta information of comparable companies as of the Valuation Date.

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Table 16: Beta of Comparable Companies

Valuation Date 9/30/2012 Subject Company Jinhua Yongjin Expressway

Source: Bloomberg

107 HK Range Period Currency Item Value 10/1/2010 9/28/2012 Weekly HKD Raw Beta 0.892 Adjusted Beta 0.928 177 HK Range Period Currency Item Value 10/1/2010 9/28/2012 Weekly HKD Raw Beta 0.67 Adjusted Beta 0.78 576 HK Range Period Currency Item Value 10/1/2010 9/28/2012 Weekly HKD Raw Beta 0.778 Adjusted Beta 0.852 995 HK Range Period Currency Item Value 10/1/2010 9/28/2012 Weekly HKD Raw Beta 0.868 Adjusted Beta 0.912

Discount Rate

CAPM 7.12% 2.00% Illiquidity Premium Source: “Marketability and Value: Measuring the Illiquidity Discount” of Stern School of Business, NYU, June 2005, by Aswath Damodaran 0.67% Country Risk Premium Source: 2012 Ibbotson SBBI Valuation Yearbook (China to HK) 1.00% Specific Risk Premium Source: “Business Valuation Discounts and Premiums”, 2nd Edition, by Shannon P. Pratt Cost of Equity 10.79%

As suggested by the “Marketability and Value: Measuring the Illiquidity Discount”, a 4% of general liquidity premium is normally applied for general industrial companies. Having considered the characteristics of the expressway industry, i.e. the expressway industry is a defensive industry, we expect that the cash flow of Jinhua Yongjin will be stable and applied a 2% illiquidity premium in the valuation exercise of Jinhua Yongjin based on our judgment.

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As suggested by the “Business Valuation Discounts and Premiums”, there exist other risks that could not be fully specified in a valuation report, and a 2%-4% premium is usually applied to reflect such other specific risks. Having considered the characteristics of the expressway industry as a defensive industry and that the cash flow of Jinhua Yongjin will be stable, we applied a 1% specific premium to reflect the other specific risks that could not be specified in the Valuation Report.

Valuation Comments

As part of our analysis, we have reviewed financial and business information from public sources together with such financial information, project documentation and other pertinent data concerning Jinhua Yongjin as has been made available to us. Such information has been provided by Wilbur Smith, Jinhua Yongjin and Zhejiang Expressway. We have assumed the accuracy of, and have relied on, such information to a considerable extent in arriving at our opinion of value.

We have made relevant searches and enquiries and obtained such further information as is considered necessary for the purposes of this exercise.

We draw your attention to the fact that we have not undertaken structural or detailed civil engineering surveys and are not therefore able to confirm that the subject toll road will be free from structural defects.

We have only considered the revenue derived from the principal operation of Jinhua Yongjin, namely: the collection of toll income and service area income, and related expenses such as toll collection costs, management and administration costs and tax, in the valuation model.

The conclusion of value is based on accepted valuation procedures and practices that rely substantially on the use of numerous assumptions and the consideration of many uncertainties, not all of which can be easily quantified or ascertained. Further, they are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of Wilbur Smith, Jinhua Yongjin, Zhejiang Expressway, and Jones Lang LaSalle Corporate Appraisal and Advisory Limited.

Risk Factors

The following factors may affect the result of this valuation:

• Traffic Volume

Traffic volume is affected by a number of factors including alternative means of transport, toll rates, fuel prices, and general economic conditions in the region. Any significant change in these factors could have a material impact on the profitability of the toll road. Furthermore, any major maintenance in the near future will also affect the traffic volume of Jinhua Section of Ningbo-Jinhua Expressway.

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• Traffic Forecast

The forecast traffic flow and revenue of Jinhua Section of Ningbo-Jinhua Expressway are affected by a number of statistical factors, including the selection of samples, variance of independent variables, stability of correlations, etc. Any development in the future which deviates from the historical trends may affect the value of the Jinhua Section of Ningbo-Jinhua Expressway.

• Uncertainty of Market Competition

The profitability of Jinhua Section of Ningbo-Jinhua Expressway may be affected by the existence of other means of transportation, including railways and planes and alternative routes to the toll roads. There can be no assurance that better quality competing roads which may allow for higher travelling speed and lower or even free tolls will not be built in the latter years of this projection.

• Toll Increase

The profitability of Jinhua Section of Ningbo-Jinhua Expressway is affected by the possibility of toll rate increases in the future. Any application for increase in the toll rate is required to be approved by local authorities. Any deviation from the estimated toll rate increase applied in this valuation will affect the resulting value.

Opinion of Values

Based on the results of our investigation and analysis, we are of the opinion that as at the Valuation Date, the market value of 100% equity interest in Zhejiang Jinhua Yongjin Expressway Co., Ltd. is reasonably stated at the amount of RMB1,026 million (RENMINBI ONE THOUSAND AND TWENTY SIX MILLION).

Limiting Conditions

This report and opinion of values are subject to our Limiting Conditions as included in Exhibit A of this report.

Yours faithfully, For and on behalf of Jones Lang LaSalle Corporate Appraisal and Advisory Limited

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Exhibit A – Limiting Conditions

1. In the preparation of our reports, we relied on the accuracy, completeness and reasonableness of the financial information, forecast, assumptions and other data provided to us by the Target Company/ engagement parties and/or its representatives. We did not carry out any work in the nature of an audit and neither are we required to express an audit or viability opinion. We take no responsibility for the accuracy of such information. The responsibility for determining expected values rests solely with the Target Company/engagement parties and our reports were only used as part of the Target Company’s/engagement parties’ analysis in reaching their conclusion of value.

2. We have explained as part of our service engagement procedure that it is the director’s responsibility to ensure proper books of accounts are maintained, and the financial information and forecast give a true and fair view and have been prepared in accordance with the relevant standards and companies ordinance.

3. Public information and industry and statistical information have been obtained from sources we deem to be reputable; however we make no representation as to the accuracy or completeness of such information, and have accepted the information without any verification.

4. The management and the Board of the Target Company has reviewed and agreed on the report and confirmed that the basis, assumptions, calculations and results are appropriate and reasonable.

5. Jones Lang LaSalle Corporate Appraisal and Advisory Limited shall not be required to give testimony or attendance in court or to any government agency by reason of this exercise, with reference to the project described herein. Should there be any kind of subsequent services required, the corresponding expenses and time costs will be reimbursed from you. Such kind of additional work may incur without prior notification to you.

6. No opinion is intended to be expressed for matters which require legal or other specialised expertise or knowledge, beyond what is customarily employed by valuers.

7. The use of and/or the validity of the report is subject to the terms of engagement letter/proposal and the full settlement of the fees and all the expenses.

8. Our conclusions assume continuation of prudent management policies over whatever period of time that is considered to be necessary in order to maintain the character and integrity of the assets valued.

9. We assume that there are no hidden or unexpected conditions associated with the subject matter under review that might adversely affect the reported review result. Further, we assume no responsibility for changes in market conditions, government policy or other conditions after the Valuation/Reference Date. We cannot provide assurance on the achievability of the results forecasted by the Target Company/engagement parties because events and circumstances frequently do not occur as expected; difference between actual and expected results may be material; and achievement of the forecasted results is dependent on actions, plans and assumptions of management.

10. This report has been prepared solely for the internal use purpose. The report should not be otherwise referred to, in whole or in part, or quoted in any document, circular or statement in any manner, or distributed in whole or in part or copied to any their party without our prior written consent. We shall not under any circumstances whatsoever be liable to any third party except where we specifically agreed in writing to accept such liability.

73 APPENDIX I VALUATION REPORT

11. This report is confidential to the client and the calculation of values expressed herein is valid only for the purpose stated in the engagement letter/or proposal as of the Valuation/Reference Date. In accordance with our standard practice, we must state that this report and exercise is for the use only by the party to whom it is addressed and no responsibility is accepted with respect to any third party for the whole or any part of its contents.

12. Where a distinct and definite representation has been made to us by party/parties interested in the assets valued, we are entitled to rely on that representation without further investigation into the veracity of the representation if such investigation is beyond the scope of normal scenario analysis work.

13. You agree to indemnify and hold us and our personnel harmless against and from any and all losses, claims, actions, damages, expenses or liabilities, including reasonable attorney’s fees, to which we may become subjects in connection with this engagement. Our maximum liability relating to services rendered under this engagement (regardless of form of action, whether in contract, negligence or otherwise) shall be limited to the charges paid to us for the portion of its services or work products giving rise to liability. In no event shall we be liable for consequential, special, incidental or punitive loss, damage or expense (including without limitation, lost profits, opportunity costs, etc.), even if it has been advised of their possible existence.

14. We are not environmental consultants or auditors, and we take no responsibility for any actual or potential environmental liabilities exist, and the effect on the value of the asset is encouraged to obtain a professional environmental assessment. We do not conduct or provide environmental assessments and have not performed one for the subject property.

15. This exercise is premised in part on the historical financial information and future forecast provided by the management of the Target Company/engagement parties. We have assumed the accuracy and reasonableness of the information provided and relied to a considerable extent on such information in arriving at our calculation of value. Since projections relate to the future, there will usually be differences between projections and actual results and in some cases, and those variances may be material. Accordingly, to the extent any of the above mentioned information requires adjustments, the resulting value may differ significantly.

16. Actual transactions involving the subject assets/business might be concluded at a higher or lower value, depending upon the circumstances of the transaction and the business, and the knowledge and motivation of the buyers and sellers at that time.

17. This report and the conclusion of values arrived at herein are for the exclusive use of our client for the sole and specific purposes as noted herein. Furthermore, the report and conclusion of values are not intended by the author, and should not be construed by the reader, to be investment advice in any manner whatsoever. The conclusion of values represents the consideration based on information furnished by the Target Company/engagement parties and other sources.

74 APPENDIX I VALUATION REPORT

Exhibit B – Valuer’s Professional Declaration

The following valuers certify, to the best of their knowledge and belief, that:

– Information has been obtained from sources that are believed to be reliable. All facts which have a bearing on the value concluded have been considered by the valuers and no important facts have been intentionally disregarded.

– The reported analyses, opinions, and conclusions are subject to the assumptions as stated in the report and based on the valuers’ personal, unbiased professional analyses, opinions, and conclusions. The valuation exercise is also bounded by the limiting conditions.

– The reported analyses, opinions, and conclusions are independent and objective.

– The valuers have no present or prospective interest in the asset that is the subject of this report, and have no personal interest or bias with respect to the parties involved.

– The valuers’ compensation is not contingent upon the amount of the value estimate, the attainment of a stipulated result, the occurrence of a subsequent event, or the reporting of a predetermined value or direction in value that favours the cause of the client.

– The analyses, opinions, and conclusions were developed, and this report has been prepared, in accordance with the International Valuation Standards published by the International Valuation Standards Committee.

– The under mentioned persons provided professional assistance in the compilation of this report.

Simon M.K. Chan Regional Director

Michael Q. Ding Associate Director

Kay P. Liu Senior Manager

Carrie H.Y. Chen Assistant Financial Analyst

75 APPENDIX I VALUATION REPORT

Exhibit C – Valuation Model of Jinhua Yongjin - - 7% 1% 6.16 58% 42% 25% 56% 54% 76% 2030 3.4% 17.75 316,251 5,952,145 4,600,000 23,336,882 70,992,146 97,127,568 -14,187,436 288,141,918 692,070,033 437,666,099 150,883,395 291,382,705 388,826,523 374,639,088 150,883,395 525,522,482 - 3% 1% 5.56 56% 40% 25% 54% 52% 75% 2029 3.4% 16.75 316,251 5,860,679 6,100,000 21,836,866 58,124,444 86,872,596 -82,000,000 -10,751,021 282,686,874 647,440,033 323,432,023 150,914,235 260,617,788 347,806,635 337,055,614 150,914,235 487,969,849 - 4% 1% 5.02 56% 40% 25% 53% 52% 76% 2028 3.4% 15.75 316,251 5,773,569 6,100,000 -6,280,791 21,162,402 67,795,751 83,304,740 -50,000,000 273,189,642 627,380,033 340,500,916 146,686,696 249,914,220 333,353,211 327,254,420 146,686,696 473,941,116 - 3% 1% 4.53 56% 39% 25% 53% 52% 76% 2027 3.4% 14.75 316,251 5,690,606 6,100,000 -2,751,101 20,416,706 71,597,050 79,402,160 -50,000,000 263,918,929 605,200,033 324,565,638 142,459,157 238,206,481 317,924,893 315,173,792 142,459,157 457,632,949 - 3% 1% 4.09 56% 39% 25% 52% 52% 76% 2026 3.4% 13.75 316,251 730,717 5,611,594 6,100,000 19,748,695 75,814,922 76,025,631 -50,000,000 254,845,488 585,355,270 310,208,511 138,231,618 228,076,893 304,418,775 305,149,492 138,231,618 443,381,110 - 5% 1% 3.69 57% 39% 25% 51% 52% 76% 2025 3.4% 12.75 316,251 5,536,345 6,100,000 4,198,292 19,104,807 80,205,304 72,767,274 -50,000,000 245,980,479 566,205,270 296,205,900 134,004,079 218,301,822 291,385,346 295,583,638 134,004,079 429,587,717 - 6% 1% 3.33 56% 37% 25% 50% 52% 76% 2024 3.4% 11.75 316,251 5,464,679 9,233,512 18,202,535 66,094,322 11,100,000 67,213,210 237,295,452 539,365,270 220,316,170 129,776,539 201,639,631 269,169,092 278,402,604 129,776,539 408,179,143 -100,000,000 - 5% 1% 3.01 55% 36% 25% 48% 51% 75% 2023 3.4% 10.75 316,251 5,396,425 17,248,905 65,584,554 11,100,000 61,115,982 15,709,751 227,876,902 511,012,162 197,321,946 125,074,000 183,347,946 244,780,178 260,489,929 125,074,000 385,563,930 -100,000,000 - 5% 1% 2.72 9.75 55% 34% 25% 46% 50% 75% 2022 3.4% 316,251 5,331,422 6,100,000 16,390,649 66,746,320 55,661,563 22,128,116 218,669,472 485,482,162 181,256,150 120,371,461 166,984,689 222,962,502 245,090,618 120,371,461 365,462,079 -100,000,000 - 5% 1% 2.45 8.75 54% 33% 25% 44% 50% 75% 2021 3.4% 316,251 5,269,514 6,100,000 15,575,401 65,722,192 50,347,399 28,520,241 Forecast 210,161,161 461,232,162 161,090,180 116,147,985 151,042,196 201,705,845 230,226,086 116,147,985 346,374,070 -100,000,000 - 8% 1% 2.21 7.75 54% 31% 25% 42% 50% 75% 2020 3.4% 316,251 5,210,554 14,839,699 61,343,722 13,100,000 45,632,341 34,863,402 201,611,360 439,370,630 135,712,156 111,915,133 136,897,023 182,845,614 217,709,016 111,915,133 329,624,149 -100,000,000 - 1% 2.00 6.75 53% 11% 28% 25% 38% 48% 74% 2019 3.4% 316,251 5,154,402 13,716,339 54,303,918 13,100,000 38,190,753 41,443,512 192,557,114 405,950,630 108,435,478 106,963,219 114,572,259 153,079,263 194,522,775 106,963,219 301,485,994 -100,000,000 - 8% 1% 1.80 5.75 50% 24% 25% 32% 45% 73% 2018 3.4% 316,251 5,100,924 7,100,000 12,419,267 46,158,161 83,191,763 88,280,458 29,426,819 48,129,607 183,687,304 367,360,630 102,011,305 118,023,528 166,153,135 102,011,305 268,164,440 -100,000,000 - 8% 1% 1.63 4.75 47% 20% 25% 26% 42% 72% 2017 3.4% 316,251 5,049,992 7,100,000 11,511,282 38,070,508 61,931,572 66,726,941 22,242,314 89,285,506 54,577,903 179,945,918 340,370,600 102,304,631 143,863,409 102,304,631 246,168,040 -100,000,000 - - 8% 0% 2% 1.47 3.75 44% 20% 20% 39% 72% 2016 3.4% 316,251 5,001,486 6,100,000 10,700,402 40,408,479 59,331,802 61,725,085 62,041,335 60,967,363 177,540,015 316,250,600 103,706,717 123,008,698 103,706,717 226,715,415 -100,000,000 - - 8% 0% 2% 1.33 2.75 42% 14% 14% 37% 71% 2015 3.4% 292,311 4,955,289 9,895,570 6,100,000 33,339,152 99,396,300 40,042,853 40,335,164 67,292,383 99,396,300 169,832,195 292,310,600 25,1556,367 107,627,546 207,023,846 -100,000,000 - - – 9% 7% 0% 7% 2% 1.20 1.75 40% 34% 70% 2014 3.4% 269,852 4,911,292 9,139,424 4,600,000 21,912,145 26,210,972 15,000,000 95,978,144 19,832,829 20,102,681 72,702,784 92,805,465 95,978,144 -70,000,000 162,995,819 269,852,000 188,783,608 - - – 6% 1% 0% 1% 2% 1.08 0.75 37% 32% 69% 2013 3.4% 248,392 4,869,391 8,417,472 1,601,413 1,849,805 -2,501,127 -2,700,384 15,800,000 10,700,000 92,198,203 77,269,214 79,119,019 92,198,203 -70,000,000 155,986,118 248,392,000 171,317,222 - - - – – 1% 0% 4% 2% 1.01 0.13 44% 38% 73% 3.4% 536,436 1,286,767 2,020,384 6,069,675 1,700,000 1,713,293 2,249,729 33,926,485 60,081,976 38,791,662 19,660,228 19,915,803 21,079,367 20,598,612 22,848,341 21,079,367 43,927,708 2012(10-12) 993,189,407 1,026,000,000 (%) EBIT rate (%) EBITDA Net profit growth (%) margin (%) margin (%) margin (%) Effective tax GP margin (%) Business tax rate As of revenue (%) Operating Expense COGS Business Tax Revenue (RMB) FCFE Valuation Summary (RMB) NPV of FCFF Forecasts Less: non-operating liability Add: non-operating asset 100% Equity Value at Controlling Level Present Value of FCFE Discount factor (mid-point) Date adjustment factor (mid-year) FCFE Less: Accounts Payable Add: Net borrowing Less: Capex Less: Changes in working capital Add: D&A Net Income Income taxes Non-operating expense Non-operating revenue EBT Financial Expense EBIT Dep. & Amort. EBITDA Business Equity Valuation of Jinhua Yongjin 76 APPENDIX I VALUATION REPORT

Exhibit D – Sensitivity Analysis

A sensitivity analysis was prepared to profile the results based on a 5%, 10% and 15% variations from the derived discount rate of 10.79%. The following table summarizes the resulting values of the Target Company.

Sensitivity Analysis for Jinhua Yongjin (RMB)

Base +5% +10% +15% Discount Rate 10.79% 11.33% 11.87% 12.41% Value 1,026,000,000 976,000,000 929,000,000 884,000,000

Base -5% -10% -15% Discount Rate 10.79% 10.25% 9.71% 9.17% Value 1,026,000,000 1,080,000,000 1,137,000,000 1,199,000,000

77 APPENDIX II TRAFFIC STUDY REPORT

The following is the English translation of a report prepared by Wilbur Smith in respect of the traffic and toll revenue study of Jinhua section of the Ningbo-Jinhua Expressway for incorporation in this Circular.

Jinhua Section of Ningbo-Jinhua Expressway in Zhejiang Province Traffic and Toll Revenue Forecasts

Final Review Report (Executive Summary)

March 2013

Wilbur Smith Associates

78 APPENDIX II TRAFFIC STUDY REPORT

1 OVERVIEW

1.1 Introduction of Project Expressway

Wilbur Smith Associates (“the consulting firm”) was appointed by Zhejiang Expressway Co., Ltd (“Zhejiang Expressway”), to conduct an independent forecast study on the traffic and toll revenue of Jinhua section of the Ningbo-Jinhua Expressway from 2012 to 2035. The forecasting report was submitted to Zhejiang Expressway in March 2012 and revised in January 2013 based on actual operation data in 2012. This report presents the final forecasts of traffic and revenue.

The Ningbo-Jinhua Expressway numbered G1512 is a link line of Shenhai Expressway (G15), an important trunk in China national expressway network plan. It runs from Lirentang, Yinzhou District of Ningbo through seven counties (cities) of Yinzhou, Fenghua, Xinchang, Shengzhou, Dongyang, Yiwu, Jinhua, and Jindong to the Fucun terminal, joining the western section of Ningbo Loop Expressway and the Hangjinqu Expressway. It is 185 km in length and crosses the Shangsan Expressway and Zhuyong Expressway with interchanges. It runs across central and western Zhejiang, linking Ningbo, Shaoxing, and Jinhua. Moreover, it is also a major corridor for the collection and distribution system for the Ningbo- Zhoushan Port.

This study covers the Jinhua section of the Ningbo-Jinhua Expressway (“project expressway) which runs 69.75 km westward from the Baifengling at the border between Dongyang and Shengzhou through Hulu Town, Weishan Town, Huailu Town, Liushi Town, Jiangbeiban in Dongyang City, Niansanli Town, Jiangdong Sub-district, Fotang Town, and Yiting Town of Yiwu City, and Fucun Town and Xiaoshun Town of Jindong District and ends at the Hangjinqu Expressway at Hongtanfan, Fucun Town. It has seven toll stations of Fucun, Yiting, Xucun, East Yiwu, Dongyang, Huailu, and Caizhai. Figure 1-1 illustrates the location of the Project Expressway.

Figure 1-1 Location of Expressway in Project

79 APPENDIX II TRAFFIC STUDY REPORT

1.2 The Basis of the Forecasts

Besides the consulting firm’s experience in this area, the analysis and conclusions contained in this report have also relied on the following:

1) The station-to-station flow record of most existing expressway in Zhejiang province from August 16 to 22, 2010 collected from Zhejiang Expressway Toll Settlement Center;

2) Toll revenue of Project Expressway in each month from 2006 to January 2012;

3) The traffic at each entry and exit by section and vehicle type of Project Expressway in each month from 2006 to January 2012;

4) The section flow by vehicle type of the Project Expressway in each month from 2006 to January 2012; 5) Survey data of Zhejiang provincial OD survey carried out at the end of 2011;

On the basis of the report of March 2012, the consulting firm has also collected some actual operational data for 2012 on Project Expressway and revised the forecast results accordingly. Besides, the newly introduced toll free policy for small passenger cars during holidays has been taken into consideration in the revision. The data used for revising the forecasts include:

1) The monthly section flow by vehicle type by direction of Project Expressway from January to December 2012;

2) The monthly traffic flow at each entry and exit point by section and by vehicle type of Project Expressway from January to December 2012;

3) The monthly toll revenue of the Project Expressway from January to December 2012.

1.3 Constraints of the Study

The consulting film has only been provided the station-to-station traffic data of certain days of the Project Expressway, statistics of traffic and toll revenue by type of vehicle of entries and exits from 2006 to December 2012, and Zhejiang provincial OD survey data (the categorization of the vehicle type is different from that of the expressway tolling system). These data are helpful in understanding the traffic features and composition of the corridor in the project. However, due to the limitation of the data and the time constraint, the consulting film had to rely mostly on such station-to-station data to forecast the future traffic and revenue growth by generating a future travel demand table using the Elasticity and Frataring methods.

80 APPENDIX II TRAFFIC STUDY REPORT

2 Current Situation of the Project Expressway

2.1 Current Development of Areas along the Expressway

2.1.1 Socio-economic Development in Zhejiang

Population

At the end of 2011, Zhejiang had a permanent population of 54.63 million, a 0.3% rise from the previous year. In 2011, the number of birth was 517,000, which equated to a birth rate of 9.47‰; and the number of death was 295,000 died, which equated to a death rate of 5.40‰. The population increased by 222,000 in 2011, with a natural growth rate of 4.07‰.

GDP

In 2011, Zhejiang reported a GDP of RMB3.2 trillion, an increase of 9.0% from previous year. The primary industry increased to RMB158.1 billion, the secondary industry to 1.6404 trillion, and the tertiary industry to RMB1.4015 trillion, grew by 3.6%, 9.1%, and 9.4% respectively. The GDP per capita was RMB58,665 (or US$9,083 by annual average exchange rate), increased by 7.1%.

Vehicle ownership

The ownership of vehicles in Zhejiang increased from 3.03 million in 2007 to 6.58 million in 2011, with an average annual growth rate of 21.4%. The ownership of private cars increased from 2.18 million to 5.36 million, with an average annual growth rate of 25.2%. The ownership of motor vehicles has been growing sharply in recent years in Zhejiang, especially the number of private cars. With the economic growth and the improvement in living standards, the ownership of motor vehicles in Zhejiang will constantly grow in a fast pace in the future years.

2.1.2 Socio-economic Development in Jinhua

Population

In 2011, the number of births was 43,973 in Jinhua. The birth rate was 9.40‰ and the rate of natural increase was 3.03‰. The population was 4.6907 million at the end of 2011, including 935,700 urban residents and 1.1036 million non-agricultural residents.

GDP

Jinhua’s GDP in 2011 reached RMB244.771 billion, rose by 10.5% year-on-year at comparable prices. The primary industry increased by 4.8% to RMB12.471 billion, the secondary industry increased by 10.2% to 124.597 billion, and the tertiary industry grew by 11.4% to RMB107.703 billion. The GDP per capita was RMB52,317 (or US$8,100 by annual average exchange rate), which was equivalent to a 9.8% increase.

81 APPENDIX II TRAFFIC STUDY REPORT

Vehicle Ownership

The ownership of motor vehicles and private cars in Jinhua increased from 700,000 and 650,000 in 2004 to 1.22 million and 1.16 million in 2010 respectively, with an average annual growth rate of 9.7% and 10.0%. Due to the economic growth and the improvement in the living standards the ownership of motor vehicles in Jinhua will increase rapidly in the future years.

2.1.3 Socio-economic Development in Shaoxing

Population

At the end of 2011, Shaoxing had 4.4001 million registered permanent residents, of which 2.2083 million were male and 2.1919 million were female, which accounted for 50.2% and 49.8% of the population respectively. Among them 1.5207 million were non-agricultural residents, which accounted for 34.6% of the whole population, a 0.8% year-on-year growth rate. The birth rate during 2011 was 7.09‰, the death rate was 6.83‰, and the rate of natural increase was 0.26‰.

GDP

Shaoxing’s GDP in 2011 reached RMB329.123 billion, a 10.5% year-on-year growth at comparable prices. It ranks 9th in Yangtze River Delta Region and 4th in Zhejiang in terms of economic output. The GDP per capita was RMB74,982 (calculated by registered permanent residents) or US$11,595 by annual average exchange rate. The primary industry increased by 3.9% to RMB17.216 billion, the second industry increased by 10.1% to 184.364 billion, and the tertiary industry rose by 12.0% to RMB127.544 billion.

Vehicle Ownership

The vehicle ownership in Shaoxing increased from 640,000 in 2006 to 940,000 in 2011, with an average annual growth rate of 10.1%. The ownership of private cars increased from 210,000 to 530,000 during the same period, with an average annual growth rate of 25.3%. The growing economies and the improving living standards will lead to a rapid growth in the the ownership of motor vehicles in Shaoxing in the future years

2.1.4 Socio-economic Development in Ningbo

Population

At the end of 2011, Ningbo had a population of 5.764 million, increased by 4.04% from a year ago. Among them 2.247 million were urban residents with a birth rate of 8.01‰, a death rate of 6.05‰, and a rate of natural increase of 1.96‰.

82 APPENDIX II TRAFFIC STUDY REPORT

GDP

Ningbo’s GDP in 2011 reached RMB601.048 billion, increased by 10.0% year-on-year at comparable prices. The primary industry increased by 4.0% to RMB25.576 billion, the second industry rose by 10% to 333.537 billion, and the tertiary industry rose by 10.7% to RMB241.935 billion. The GDP per capita was RMB77,983 (or US$12,074 by the annual average exchange rate of 2011).

Vehicle Ownership

The vehicle ownership in Ningbo ascended from 380,000 in 2005 to 550,000 in 2008, with an average annual growth rate of 14.0%. The number of commercial vehicles rose from 65,000 in 2009 to 85,000 in 2011, with an average annual growth rate of 14.8%. As the economy grows and living standards improve, the future years will see a rapid increase in the motor vehicle ownership in Ningbo.

2.2 Traffic Conditions of the Project Expressway

Jinhua section of the Ningbo-Jinhua Expressway has been in operation for over six years since it was opened at the end of 2005. With stable traffic composition, pattern, and flow, it is very unlikely to see explosive growth in the future. The traffic and revenue declined during 2008 and 2009 because of the financial crisis and then rebounded with a growth of 37.3% in 2010. The average annual growth rate over the past six years was about 14%.

2.2.1 Traffic on Project Expressway

Traffic at entries and exits

During the past six years, the yearly growth has been stable with an average annual growth rate of 14.8% except in 2008 and 2009 when it fluctuated due to the recession.

83 APPENDIX II TRAFFIC STUDY REPORT

Figure 2-1 Traffic growth at entries and exits of Project Expressway

Historical En&Ex Traf c Volume (Vehicle/day)

25000

20000

15000 9801 8198 Ex 10000 6361 6536 5023 5944 En 5000 7749 9523 6044 5970 4652 5539 0 2006 2007 2008 2009 2010 2011

Source: Wilbur Smith Associates 2012

Figure 2-2 Traffic at entries and exits of Project Expressway

En&Ex Traf c Volume by Tollgates in 2011 (Vehicle/day)

7000

6000 3188 5000

4000 2488 Ex 3000

2000 En 3453 1135 948 2472 777 809 1000 456 359 958 531 409 750 0 Fuchun Yiting Xuchun Yiwu East Dongyang Huailu Caizhai

Source: Wilbur Smith Associates 2012

Composition of vehicle types for entries and exits

Vehicles passing the entries and exits of the Project Expressway are mostly private cars, which account for about 64% of the total traffic. Small passenger cars (Type 1 passenger cars) dominate passenger cars, accounting for about 60% of the total traffic. Goods vehicles account for 36% of the total vehicles. They are mostly small trucks (Goods vehicle Type 1) and 40-inch container trucks (Goods vehicle Type 7), which account for 14% and 11.4% of the total traffic respectively.

84 APPENDIX II TRAFFIC STUDY REPORT

Figure 2-3 Composition of vehicle types for entries and exits of Project Expressway

En&Ex Vehicle Classes Structure in 2011 PV1

PV2

PV3

GV1

GV2

GV3

GV4

GV5

GV6

GV7

Source: Wilbur Smith Associates 2012

Section flow distribution

Figure 2-4 shows the average daily section flow on the Project Expressway in 2011. It can be seen that the traffic on the section to the west of the Yiwu toll station was lower than that on the section to the east and the heaviest traffic was found on the Yiwudong-Huailu Interchange section, suggesting that some vehicles going to or leaving Yiwu chose to use the Shangsan Expressway.

Figure 2-4 Average daily section flow (vehicles) on Project Expressway in 2011

Section Traf c Volume of Project Expressway

16000 14000 14728 12000 13141 12166 11471 10000 10771 8000 9248 9198 9203 9083 6000 4000 2000 0

Fuchun-Yiting Yiting-Xuchun Dongyang-Huailu Xuchun-Yiwu East Yiwu East-Dongyang Fuchun Interchange-Fuchun Huailu-Huailu InterchangeHuailu Interchange-CaizhaiCaizhai-Jinhua Borderline

Source: Wilbur Smith Associates 2012

85 APPENDIX II TRAFFIC STUDY REPORT

The percentages of private cars and goods vehicles of each section obtained from the data collected are shown in Figure 2-5. It can be easily seen that the percentage of goods vehicles on the section to the east of the Huailu Interchange was 10% higher than that to the west, showing that most goods vehicles either traveled to or from Ningbo.

Figure 2-5 Section flow of passenger cars and goods vehicles on Project Expressway in 2011

Passenger Vehicle and Goods Vehicle Proportion by Sections 100%

80% 36.4% 36.2% 36.5% 36.4% 35.4% 33.5% 38.7% 46.7% 51.0% 60%

40% 63.6% 63.8% 63.5% 63.6% 64.6% 66.5% 61.3% 20% 53.3% 49.0%

Fuchun-Yiting Yiting-Xuchun Xuchun-Yiwu East Dongyang-Huailu Yiwu East-Dongyang Caizhai-Jinhua Borderline Fuchun Interchange-Fuchun Huailu-Huailu InterchangeHuailu Interchange-Caizhai Passenger Vehicle Goods Vehicle

Source: Wilbur Smith Associates 2012

Sectional composition of vehicle types

The composition of vehicle types for weighted section flow on Project Expressway in 2011 obtained from the data collected is shown in Figure 2-6. Compared to the composition of vehicle types for entries and exits, it can be seen that the percentages of Passenger Vehicle Type 1 (small passenger cars), Goods Vehicle Type 1 (small trucks), and Goods vehicle Type 7 (40-inch container cars) decreased, while that of Goods Vehicle Type 5 (big trucks) increased. This indicated that Passenger Vehicle Type 1 and Goods Vehicle Type 1 and 7 traveled mostly over short distances rather than the long distance while Goods Vehicle Type 5 traveled mostly over long distances (cross-border).

86 APPENDIX II TRAFFIC STUDY REPORT

Figure 2-6 Sectional composition of vehicle types on Project Expressway in 2011

Sectional Vehicle Classes Structure in 2011

PV1

PV2

PV3 GV1

GV2

GV3

GV4

GV5

GV6

GV7

Source: Wilbur Smith Associates 2012

Daily traffic changes

The time distribution of traffic on Project Expressway obtained from the station-to-station flow record collected shows that a large portion (over 80%) of passenger cars travel during 7:00- 20:00; there is no obvious peak for trucks and the passenger car unit (PCU) peak occurs during 7:00-8:00 with a peak hour factor of 7.2%.

Figure 2-7 Time distribution of traffic on Project Expressway

Daily Traf c Distribution of Project Expressway (in Vehicle)

Passenger Goods Total Vehicle Vehicle Vehicle

Source: Wilbur Smith Associates 2012

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Monthly traffic changes

Monthly traffic changes obtained from the data on section flow show that January and October are the peak months of traffic while June represents the lowest level.

Figure 2-8 Monthly traffic changes of Project Expressway in 2011

Monthly Traf c Distribution of Project Expressway in 2011

14000 12000 10000 8000 6000 4000 2000 0 1 2 3 4 5 6 7 8 9 10 11 12

Source: Wilbur Smith Associates 2012

Composition of traffic on Project Expressway in Project by source

The consulting firm has conducted an in-depth analysis of the composition of traffic on Project Expressway by travel direction. Vehicles are divided into passenger cars and goods vehicles, as shown in Table 2-1 and Table 2-2. It is found that a majority of vehicles using Project Expressway come from Shaoxing, Jinhua, and Ningbo and these traffic consists of 55% passenger vehicles and 64% goods vehicles.

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Table 2-1 Composition of passenger vehicles traffic by direction of Project Expressway

Destination Ningbo/ Outside Hangzhou Shaoxing Jinhua Quzhou Jiaxing Huzhou Taizhou Wenzhou Lishui Total Origin Zhoushan Zhejiang Hangzhou 0.13% 3.36% 0.01% 0.03% 3.53% Shaoxing 0.12% 1.35% 6.79% 0.57% 0.48% 0.01% 0.00% 0.15% 0.13% 0.33% 0.54% 10.47% Jinhua 3.27% 6.43% 22.33% 3.38% 8.73% 0.38% 0.14% 2.88% 2.77% 2.21% 2.64% 55.15% Quzhou 0.48% 3.45% 1.41% 0.02% 0.08% 5.43% Ningbo/ 0.01% 0.36% 8.58% 1.58% 0.02% 0.01% 0.62% 0.91% 12.08% Zhoushan Jiaxing 0.01% 0.39% 0.05% 0.00% 0.00% 0.02% 0.03% 0.50% Huzhou 0.00% 0.15% 0.16% Taizhou 0.03% 0.13% 2.72% 0.11% 0.01% 0.03% 0.11% 3.14% Wenzhou 0.12% 2.38% 0.01% 0.00% 2.51% Lishui 0.31% 2.14% 0.72% 0.05% 0.02% 3.24% Outside 0.47% 2.47% 0.76% 0.02% 0.08% 3.79% Zhejiang Total 3.42% 9.78% 54.77% 5.68% 12.12% 0.48% 0.14% 3.26% 2.91% 3.21% 4.22% 100.00%

Source: Wilbur Smith Associates 2012

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Table 2-2 Composition of traffic of goods vehicles by direction on Expressway in Project

Destination Ningbo/ Outside Hangzhou Shaoxing Jinhua Quzhou Jiaxing Huzhou Taizhou Wenzhou Lishui Total Origin Zhoushan Zhejiang Hangzhou 0.09% 1.35% 0.01% 0.06% 1.51% Shaoxing 0.11% 0.84% 6.87% 0.66% 0.24% 0.08% 0.00% 0.15% 0.08% 0.17% 1.52% 10.72% Jinhua 1.47% 6.37% 10.41% 1.42% 19.29% 0.28% 0.08% 1.02% 0.33% 0.42% 3.35% 44.44% Quzhou 0.63% 1.55% 2.67% 0.05% 0.13% 5.03% Ningbo/ 0.00% 0.17% 19.99% 2.29% 0.01% 0.58% 2.82% 25.86% Zhoushan Jiaxing 0.02% 0.28% 0.04% 0.01% 0.16% 0.50% Huzhou 0.00% 0.07% 0.08% Taizhou 0.03% 0.08% 1.11% 0.06% 0.00% 0.02% 0.07% 1.37% Wenzhou 0.06% 0.45% 0.00% 0.51% Lishui 0.23% 0.46% 0.69% 0.01% 0.04% 1.43% Outside 0.85% 4.59% 2.97% 0.06% 0.10% 8.57% Zhejiang Total 1.61% 9.34% 47.12% 4.46% 25.88% 0.48% 0.08% 1.50% 0.41% 1.20% 7.91% 100.00%

Source: Wilbur Smith Associates 2012

2.2.2 Revenue of Project Expressway

The toll revenue of Project Expressway has been growing steadily since it was opened at the end of 2005. The revenue remained flat during the crisis in 2008 and 2009 and resumed to growth in 2010. The average annual growth rate over the past six years was about 14%. Figure 2-9 illustrates the toll revenue of Project Expressway over the past six years.

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Figure 2-9 History toll revenue of Project Expressway

Historical Toll Revenue of Project Expressway (10 thousand)

25000

20000 21811

15000

18995 10000 14304 14416 13835 5000 11308

0 2006 2007 2008 2009 2010 2011

Source: Wilbur Smith Associates 2012

From April 16, 2010, goods vehicles on expressways in Zhejiang are charged by weight. In the new toll system, passenger vehicles are charged an extra entry fee on top of the original fee by vehicle type and mileage; Goods Vehicle Type 1 through 5 of goods vehicles are charged by actual weight and mileage, Goods Vehicle Type 6 (20-inch container cars) and Goods Vehicle Type 7 (40-inch container cars) continue to be charged by vehicle type and mileage with discounts. Table 2-3 gives the average toll rates for Project Expressway obtained from the analysis of station-to-station flow records.

Table 2-3 Average toll rates for Project Expressway (RMB/km)

Passenger Passenger Passenger Goods Goods Goods Goods Goods Goods Goods Vehicle type vehicles vehicles vehicles vehicles vehicles vehicles vehicles vehicles vehicles vehicles type 1 type 2 type 3 type 1 type 2 type 3 type 4 type 5 type 6 type 7

Rate 0.46 0.85 1.22 0.65 1.14 1.48 1.60 1.81 0.95 1.14

Source: Wilbur Smith Associates 2012

3 TRAFFIC FORECASTING MODEL

The mathematical model used in this study is called the simplied four-step model, which is commonly used in inter-city traffic forecast studies. The major difference of this simplified model is the exclusion of the modal split step and function. It uses a traffic survey that covers the whole study area to establish and develop an observed traffic pattern and volume. The traffic survey data as well as the traffic pattern are used for validation of the computer assignment model. This step forms the basis to forecast the future traffic by obtaining the relationship between the economy and traffic growth.

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In short, the simplified four-step model completes the trip generation and distribution steps by means of traffic surveys, develops a single-mode trip table, and then performs traffic assignment by using a computer road network model. The trip generation and distribution obtained from OD surveys are information derived from indirect method; therefore, a set of rigorous survey methods and data expansion procedures is necessary. Moreover, the validation of the computer assignment model is an important factor affecting forecast precision.

3.1 Technical Approach to Traffic Modeling

Figure 3-1 summarizes the technical approach for the traffic demand forecast for the Project Expressway.

Figure 3-1 Project Expressway Traffic Demand Forecast Approach

Traffic Volume Data

Historical Comprehensive Traffic Volume Data Transport Infrastructure Traffic Volume by Vehicle Type and Related Data Car Ownership t Traffic Stn- Stn En&Ex Traffic Economic Situation and Exiting Road Historical Network Records Economic Development Volume Development Planning Forecast of Zhejiang of Zhejiang and and Surrounding Areas Surrounding Regions

Law of Traffic Growth

Elasticity Coefficient Method

Traffic Growth Rate and Fratar Distribution Stn-Stn Traffic Volume in Future Value of Time Tariff Future Road Network

Generalized Cost Key Infrastructure Calculation Development Plan in Zhejiang

Traffic Assignment for Future Years

Traffic and Revenue Forecast for Future Years

Source: Wilbur Smith Associates 2012 92 APPENDIX II TRAFFIC STUDY REPORT

3.1.1 Road Network

During the course of developing the base year road network, the consulting firm made reference to the network data from the Zhejiang Expressways Toll Clearing Centre, such as the distance between toll stations. All major roads were incorporated in the modelled road network, including expressways, national highways, provincial roads, and other major arterials. The modelled road network characteristics included speed, capacity, length, and service standards are represented by quantified delay and cost functions.

3.1.2 Volume Delay Functions

Travel time is basically determined by the travel speed, which depends on the level of traffic congestion. The traffic volume and level of services results estimated from traffic assignment are stored in the databank. The volume delay function (VDF) applied in the model has the following expression:

VDF = Len*[60/Sf+A*(V/C-R1)+B*(V/C-R2)]

Where VDF = Volume Delay Function Len = Length Sf = Free Flow Speed V/C = Volume to Capacity Ratio R1,R2 = Ranges of the V/C for the Applicable to the Parameters A,B = Model Coefficients

3.1.3 Passenger Car Unit (PCU)

In general, different kinds of vehicles were converted into standard Passenger Cars Units (PCU). Table 3-1 shows the PCU factors adopted in this study.

Table 3-1 Passenger Car Units

Vehicle type Tolling Category Vehicle Classifications PCUs Passenger Type 1 20 seats or below 1.0 Vehicles Type 2 21-40 seats 1.5 Type 3 With more than 40 seats (including 2.5 sleeping coach with more than 32 seats) Goods Type 4 Weight less than 2 tons 1.5 Vehicles Type 5 Weight more than 2 tons but less than or 2.0 equal to 5 tons Type 6 Weight more than 5 tons but less than or 2.5 equal to 10 tons Type 7 Weight more than 10 tons but less than or 2.5 equal to 15 tons Type 8 Weight more than 15 tons 3.0 Type 9 20-foot container truck 3.0 Type 10 40-foot container truck 3.0

Source: Wilbur Smith Associates 2012

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3.1.4 Toll System and Toll Rates

Since April 16, 2010, goods vehicles in Zhejiang Expressways are charged according to weight- based tolling. In such new toll system, passenger vehicles and goods vehicles are treated differently. The toll rates are shown in Table 3-2.

Toll Rates for Passenger Vehicles

Table 3-2 Toll rates for Passenger Vehicles in Zhejiang Expressways

Entry Toll Distance Toll Type Criterion (RMB/Vehicle) (RMB/Vehicle/km) 1 Less than or equal to 20 seats 5 0.40 2 With 21-40 seats 10 0.80 3 With more than 40 seats (including 15 1.20 sleeping coach with more than 32 seats)

Source: Zhejiang Expressway Co., Ltd, 2012

Toll Rates for Goods Vehicles

Ordinary goods vehicles refer to trucks other than container trucks. They are charged according to weight-based tolling at rates given in Table 3-3. Container trucks are charged at old rates. Type 6 goods vehicles (20-foot container trucks) are charged at RMB1.20/vehicle/km and Type 7 (40-foot container trucks) by RMB1.40/vehicle/km. Moreover, in order to attract container vehicles to use expressways, Ningbo offers 30% discounts of toll rates.

Table 3-3 Weight-based Tolling Rates for Goods Vehicles in Zhejiang Expressways

Weight ≤5 tons 5-15 tons 15-30 tons Over 30 tons Legally loaded Rate RMB0.09/ton km RMB0.09/ton km×1.5 decreasing linearly to RMB0.09/ton km decreasing Charged at 30 RMB0.09/ton km linearly to RMB0.06/ton km tons Overloaded 10% 10%-30% 30%-50% 50%-100% over 100% by ≤10% RMB0.09/ton km

Overloaded ≤30% RMB0.09/ton km RMB0.09/ton km×1.2 ≤50% RMB0.09/ton km RMB0.09/ton km×1.2 RMB0.09/ton km×2 ≤100% RMB0.09/ton km RMB0.09/ton km×1.2 RMB0.09/ton km×3 >100% RMB0.09/ton km RMB0.09/ton km×1.2 RMB0.09/ton km×4

Source: Zhejiang Expressway Co., Ltd, 2012

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Because passenger vehicles and container trucks are charged an extra entry toll in addition to the distance toll, and goods vehicles are charged according to the weigh-based tolling, we first calculated the weighted average toll rates for different types of vehicles (see Table 3-3) and then the revenues of different types of vehicles and different sections assuming a flat toll rate in the future years.

Passenger vehicles have their fixed toll rates which are not weight-based tolling. Therefore, it is not applicable to apply this kind of average charge rates for passenger vehicles. The average charge rates are just applicable to goods vehicles which are charged by weight-based tolling. Container trucks are charged by a different factor of size, which factor does not apply to the other types of vehicles.

3.1.5 Toll Exemption and Discounts

A proportion of around 1% of toll-free vehicles were recorded from the station-to-station traffic data for the Project Expressway. This proportion of toll-free vehicles are included in traffic assignment but removed when calculating revenues.

Container trucks are not charged tolls by weight in Zhejiang but are classified by size. 20- foot container trucks are charged by RMB1.2/km and 40-foot containers by RMB1.4/km. Moreover, container trucks traveling from or to the Beilun Port in Ningbo can enjoy a 30% discount. As the Project Expressway is linking to Ningbo, container trucks enjoying the 30% discount are in a large portion.

In addition, a policy introduced in 2012 exempts cars from tolling during the holidays of Qingming, Labor Day, National Day, and Chinese New Year Festival (20 days in total) and the consulting firm assumes the policy will continue in the future years.

3.1.6 Trip Assignment Process

This study adopted the generalised cost as the factor determining user route choice behaviours and utilised it in traffic flow equilibrium assignment. This generalised cost equilibrium assignment is to account for all costs influencing users’ route choices, such as travel time, trip length and costs. The latter can be further divided into vehicle operating costs and tolls. The generalised cost is expressed as follows:

GCij = Tij +【Cij + Tolij】/VOT

Where GCij = Generalised Cost Skim Tij = Travel Time from Traffic Zone i to j Cij = Perceived Travel Cost from Traffic Zone i to j such as Perceived Vehicle Operating Cost Tolij = Toll Paid Travelling from Traffic Zone i to j VOT = Value of Time per Vehicle by the Vehicle Class

The traffic assignment method adopted in this study measures the willingness of an ordinary driver to pay tolls. The process takes into consideration the speed and traffic volume of the Project Expressway and the competing roads. Trips between two zones in the trip matrix are assigned to the path with the lowest generalised cost iteratively. During each iteration, vehicles are assumed to select the path with the lowest generalised cost, including travel time, distance travelled, vehicle operating cost and toll. 95 APPENDIX II TRAFFIC STUDY REPORT

3.2 Model Calibration Results

On the basis of the former model in order to present this final report, traffic demand model has been calibrated by using the latest traffic data including 2011 sections flows, entry and exits flows, to ensure the accuracy of the traffic forecast. Table 3-4 shows the calibrated results.

Table 3-4 Model Calibration Results

Section/station Direction Model Actual Error Fucun Interchange-Fucun Eastbound 4612 4517 2.1% Fucun-Fucun Interchange Westbound 4633 4731 -2.1% Fucun-Yiting Eastbound 4535 4582 -1.0% Yiting-Fucun Westbound 4676 4616 1.3% Yiting-Xucun Eastbound 4511 4562 -1.1% Xucun-Yiting Westbound 4667 4642 0.5% Xucun-Yiwu East Eastbound 4464 4503 -0.9% Yiwu East-Xucun Westbound 4568 4580 -0.2% Yiwu East-Dongyang Eastbound 5509 5478 0.6% Dongyang-Yiwu East Westbound 5347 5293 1.0% Dongyang-Huailu Eastbound 6605 6651 -0.7% Huailu-Dongyang Westbound 6495 6490 0.1% Huailu-Huailu Interchange Eastbound 7325 7368 -0.6% Huailu Interchange-Huailu Westbound 7386 7361 0.3% Huailu Interchange-Caizhai Eastbound 5680 5655 0.4% Caizhai-Huailu Interchange Westbound 5767 5815 -0.8% Caizhai-Jinhua Border Eastbound 5999 5972 0.4% Jinhua Border-Caizhai Westbound 6169 6194 -0.4% Entry 542 521 4.0% Fucun Station Exit 732 769 -4.9% Entry 404 405 -0.3% Yiting Station Exit 439 451 -2.7% Entry 971 935 3.9% Xucun Station Exit 919 934 -1.5% Entry 3417 3422 -0.2% Yiwu East Station Exit 3151 3160 -0.3% Entry 2423 2432 -0.4% Dongyang Station Exit 2474 2449 1.0% Entry 974 953 2.2% Huailu Station Exit 1145 1129 1.4% Entry 747 744 0.5% Caizhai Station Exit 831 802 3.6%

Source: Wilbur Smith Associates 2012

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3.3 Future Growth Trends for Project Expressway

3.3.1 Regional Growth Forecast for Future Years

Future year travel demands are based on a basic assumption that a relationship exists between traffic growth and GDP growth, which has been demonstrated from the experience in many other cities in China. GDP growth assumptions for the affected area of the Project Expressway have to be worked out before forecasting the future traffic growth.

As non-economic professionals, the consulting firm perform the forecast base on future trends from the following sources:

– History growth trends: collect history data and engineering judgments will be made when necessary;

– The Twelfth-Five Year Plan: make reference to the goals and requirement from the Plan

– Master Plans of the Cities: make reference to the goals and requirement from the Plans

– Cross-reference to the Domestic/International experience: make reference to the indexes of different stages in the process of development of developed cities in China and overseas

– Other industrial plans: make reference to the goals and requirement from the Plan

Table 3-5 summarizes the future growth of economic indexes of each area obtained from the judgment (control values) of future trends of economic indexes based on the plans and references which combined with a regression analysis (trend curve) of history data covering each area of economic analysis. These growth rates are applied in the economic-transport model to calculate the future traffic growth rate for each traffic corridor.

The economic-transport model refers to the relationship between economic growth and the traffic growth which forms the future growth rates assumption. The future growth rates are not directly applied to grow up the base year traffic demand matrix to the future year demand matrix. The Future year traffic demands are based on an assumption that a relationship (elasticity) exists between traffic growth and GDP growth based on our past experience (and is commonly adopted in the industry). By making regression analysis and comparison between the historical traffic growths in many toll roads in China, this correlation has been proven to be valid. Future year matrices can be obtained by using these kinds of relationships to base year passenger and goods vehicles trip matrices. The method adopted is called “Fratar method” which is a typical method adopted in the industry.

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Table 3-5 Future annual GDP growth assumptions in Zhejiang and areas along the Project Expressway

Area 2012-2013 2013-2015 2015-2020 2020-2025 2025-2030 2030-2035 Hangzhou 9.0% 7.0% 5.5% 4.0% 3.0% 2.0% Uptown 8.5% 7.0% 5.5% 4.0% 3.0% 2.0% Downtown 8.0% 6.5% 5.0% 3.5% 2.5% 1.5% Jianggan District 8.0% 6.5% 5.0% 3.5% 2.5% 1.5% Gongshu District 8.0% 6.5% 5.0% 3.5% 2.5% 1.5% Xihu District 9.0% 7.5% 6.0% 4.5% 3.5% 2.5% Binjiang District 8.5% 7.5% 6.0% 4.5% 3.5% 2.5% Xiaoshan District 9.5% 8.5% 7.0% 5.5% 4.0% 3.0% Yuhang District 9.0% 8.0% 7.0% 5.5% 4.0% 3.0% Tonglu County 8.0% 6.5% 5.0% 3.5% 2.5% 1.5% Chun’an County 8.0% 6.5% 5.0% 3.5% 2.5% 1.5% Jiande 8.5% 7.5% 6.0% 4.5% 3.5% 2.5% Fuyang 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% Lin’an 10.0% 8.5% 7.0% 5.5% 4.5% 3.5% Huzhou 9.5% 8.5% 7.0% 5.5% 4.0% 3.0% Jiaxing 9.0% 8.0% 6.5% 5.5% 4.5% 3.5% Ningbo 8.0% 7.0% 5.5% 4.0% 3.0% 2.0% Shaoxing 9.0% 8.0% 6.5% 5.0% 4.0% 3.0% Zhoushan 9.5% 8.5% 7.0% 5.5% 4.0% 3.0% Wenzhou 7.0% 6.5% 5.5% 4.5% 3.5% 2.5% Taizhou 7.5% 7.0% 6.5% 5.5% 4.0% 3.0% Jinhua 10.0% 9.0% 8.5% 6.0% 4.5% 3.5% Quzhou 9.0% 8.0% 7.5% 6.5% 4.5% 3.5% Lishui 10.0% 9.0% 8.5% 6.0% 4.5% 3.5% Shanghai 7.5% 6.5% 5.0% 3.5% 2.5% 1.5% Jiangsu province 10.5% 9.5% 9.0% 6.5% 4.5% 3.5% Anhui province 11.0% 10.0% 9.5% 6.5% 4.5% 3.5% Jiangxi province 11.0% 9.0% 7.5% 6.0% 4.5% 3.0% Fujian province 11.0% 9.5% 8.0% 6.5% 4.5% 3.5% Other parts of China 7.5% 6.5% 5.5% 4.5% 3.0% 2.0%

Source: Wilbur Smith Associates, 2012

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3.3.2 Future Regional Elasticity Factors Assumptions

Based on the regression analysis of historical transport-economic data and the consulting firm’s experience in traffic forecasts studies from a dozen of expressways in the region, we have obtained the elasticity factors that can be used for the region in future years. Please refer to Table 3-6. The short-term elasticity factors have been calibrated in January 2013 on the basis of forecasts for 2012 against the actual traffic data in 2012. Table 3-6 shows the calibrated elasticity factors.

Table 3-6 Future elasticity factors for the project corridors

Period 2012-2015 2015-2020 2020-2025 2025-2030 2030-2035 For passenger vehicles 1.05 1.05 0.95 0.80 0.70 For goods vehicles 1.05 1.05 0.95 0.85 0.75

Source: Wilbur Smith Associates, 2012

3.3.3 Assumptions about Road Network Changes in Future Years

Expressways that have significant influence on the traffic on Project Expressway include the Hangzhou Bay-Xiaoshan Channel, the Zhushao Expressway, Hangzhou Bay-Shaoxing Channel, No.2 Hangzhou Loop Expressway, the Dongyong Expressway, and the Hangshaotai Expressway. Table 3-7 lists the new expressways in Zhejiang in future years.

Table 3-7 New Expressways

SN Name Open in Description 1 Shaoxing- Zhuji 2012 About 62.56 km in length, 4-lane dual Expressway carriageway, designed speed of 120 km/ hour, starts from Guzhu in Shangyu and ends at Gaohuyan in Zhuji, joining the Zhuyong Expressway 2 Hangzhou Bay-Xiaoshan 2013 43.6 km in length, 6-lane dual Channel carriageway, designed speed of 120 km/ hour (80 km/hour for tunnels), joins the Huhang Expressway in the north, crosses the Huhang Railway and Hangpu Expressway, and then the Qiantang River southward through a 3,8 km tunnel and links the Hangyong Expressway. 3 Hangzhou Bay-Shaoxing 2013 69 km in length, including a 10.2 km river- Channel crossing bridge, 8-lane dual carriageway, designed speed of 120 km/hour, runs southward from the Nanhu terminal on the Zhajiasu Expressway in Xiuzhou District, Jiaxing to the Guzhu terminal where the Hangyong Expressway in Shangyu, Shaoxing joins the Shangsan Expressway.

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SN Name Open in Description

4 Dongyong Expressway 2013 44.648 in length, 4-lane dual carriageway, designed speed of 100 km/hour, starts from the Mazhai terminal on the Zhuyong Expressway in Dongyang and ends at the Xindian terminal on the Wengao Expressway at Jinli, Yongkang.

5 No.2 Hangzhou Loop 2019 Carriers the Shenjiahuhang Expressway, Expressway the Qianjiang Channel, the link expressway, Shaozhu Expressway, and Zhuyong Expressway on the east section and the west section is a new expressway about 145 km in length, 6-lane dual carriageway.

6 Hangshaotai Expressway 2019 Over 171 km in length, stars from the Qixian terminal on the south link of the Qianjiang Channel and ends at the Baishuiyang terminal to the west of Kuocang, Linhai and to the east of the Baishuiyang Interchange of the Taijin Expressway

Source: Zhejiang Expressway Co., Ltd, 2011

3.3.4 Assumptions of Future Toll Rates

Beginning from April 16, 2010, goods vehicles on expressways in Zhejiang are charged according to weight-based tolling. Under the new toll system, passenger vehicles and goods vehicles are treated differently.

Because passenger vehicles and container trucks are charged an extra gate-in toll on top of the distance toll and goods vehicles are charged according to weight-based tolling, we first calculated the average rates for different types of vehicles (see Table 2-3) and then the revenues of different types of vehicles and different sections assuming a flat toll rate in the future years.

4 TRAFFIC FORECAST FOR PROJECT EXPRESSWAY

4.1 Traffic Forecast for Project Expressway

This forecast study uses 2011 as the base year and the traffic forecast period is 2012 to 2035. Wilbur Smith’s traffic model was developed to forecast the traffic volume and section flow by vehicle type for each year during 2012-35, taking into account the influences from regional economic growth and road network changes.

In January 2013, based on the forecasts generated in March 2012, the consulting firm revised the future years forecasts using the actual operational data in from January to December 2012. The changes made was mainly on the elasticity factors, as shown in Table 4-1 and Table 4-2. 100 APPENDIX II TRAFFIC STUDY REPORT

Table 4-1 Traffic on Jinhua section of Ningbo-Jinhua Expressway (vehicles/day)

Fucun Huailu- Huailu Caizhai- Interchange- Fucun- Yiting- Xucun-Yiwu Yiwu East- Dongyang- Huailu Interchange- Jinhua Weighted Year Fucun Yiting Xucun East Dongyang Huailu Interchange Caizhai Border average 2012(R) 10,109 10,182 10,291 10,539 12,618 15,025 16,593 12,134 12,718 12,085 2012(M) 10,143 10,230 10,319 10,486 12,648 15,016 16,625 12,122 12,726 12,091 2013(2) 10,859 10,955 11,047 11,226 13,577 16,211 17,992 13,391 14,055 13,065 2014 11,842 11,947 12,048 12,239 14,776 17,639 19,583 14,552 15,272 14,224 2015 12,885 12,995 13,105 13,309 16,046 19,157 21,280 15,778 16,560 15,450 2016(3) 13,979 14,098 14,216 14,429 17,347 20,696 22,997 16,989 17,830 16,706 2017 15,167 15,296 15,423 15,645 18,754 22,358 24,853 18,308 19,212 18,068 2018 16,457 16,598 16,734 16,964 20,276 24,153 26,859 19,725 20,696 19,540 2019(4) 17,937 18,106 18,255 18,493 22,023 26,221 29,157 23,558 24,596 21,692 2020 19,467 19,650 19,809 20,056 23,812 28,327 31,511 25,386 26,500 23,461 2021 20,562 20,752 20,916 21,163 25,077 29,822 33,180 26,682 27,850 24,716 2022 21,720 21,915 22,084 22,332 26,409 31,395 34,937 28,045 29,268 26,039 2023 22,943 23,145 23,318 23,565 27,811 33,051 36,788 29,476 30,759 27,432 2024 24,235 24,443 24,622 24,867 29,288 34,794 38,736 30,980 32,323 28,900 2025 25,600 25,815 25,999 26,241 30,843 36,629 40,788 32,562 33,967 30,447 2026 26,508 26,727 26,916 27,160 31,891 37,867 42,179 33,638 35,089 31,488 2027 27,448 27,672 27,866 28,111 32,975 39,148 43,617 34,750 36,249 32,565 2028 28,422 28,651 28,849 29,096 34,096 40,472 45,104 35,899 37,446 33,679 2029 29,431 29,664 29,868 30,115 35,254 41,841 46,643 37,336 38,934 34,883 2030 30,920 31,157 31,373 31,619 36,983 43,858 49,034 39,989 41,748 36,784 2031 31,997 32,233 32,455 32,694 38,203 45,278 50,714 41,460 43,327 38,049 2032 33,118 33,352 33,580 33,812 39,471 46,751 52,461 43,173 45,155 39,402 2033 34,252 34,483 34,717 34,941 40,753 48,246 54,014 44,780 46,883 40,739 2034 35,285 35,512 35,752 35,967 41,937 49,649 53,635 46,224 47,002 41,778 2035 36,476 36,699 36,945 37,148 43,281 51,219 53,356 47,844 46,756 42,926

101 APPENDIX II TRAFFIC STUDY REPORT

Table 4-2 Sectional weighted average traffic by vehicle type on Jinhua section of Ningbo-Jinhua Expressway

Year Passenger Passenger Passenger Truck 1 Truck 2 Truck 3 Truck 4 Truck 5 Truck 6 Truck 7 Total car 1 car 2 car 3 2012(R) 6979 319 206 1387 159 332 151 1225 35 1291 12085 2012(M) 6984 319 206 1389 158 334 151 1225 35 1290 12091 2013(2) 7514 339 224 1510 173 361 164 1324 39 1418 13065 2014 8190 369 244 1645 188 392 178 1433 42 1543 14224 2015 8914 401 264 1788 203 422 192 1541 45 1680 15450 2016(3) 9653 433 285 1934 219 454 207 1657 48 1815 16706 2017 10457 467 308 2092 236 489 223 1782 52 1960 18068 2018 11328 505 333 2263 255 527 239 1916 56 2117 19540 2019(4) 12645 555 369 2527 285 586 260 2118 60 2287 21692 2020 13699 600 398 2734 308 631 280 2278 64 2470 23461 2021 14444 631 420 2881 324 664 294 2396 67 2596 24716 2022 15229 663 442 3035 341 699 310 2520 71 2728 26039 2023 16056 698 466 3198 360 736 326 2651 74 2867 27432 2024 16929 734 492 3369 379 774 344 2788 78 3013 28900 2025 17850 772 518 3550 399 815 362 2933 82 3166 30447 2026 18460 797 535 3678 413 843 374 3031 84 3273 31488 2027 19091 823 553 3810 428 872 387 3131 87 3383 32565 2028 19744 850 572 3947 443 902 400 3236 89 3496 33679 2029 20471 878 591 4089 458 932 413 3343 92 3614 34883 2030 21163 907 611 4425 495 1004 445 3736 99 3899 36784 2031 21649 926 625 4662 522 1057 478 3930 104 4096 38049 2032 22145 953 639 4925 556 1135 503 4135 109 4302 39402 2033 22650 973 669 5189 585 1195 530 4316 114 4518 40739 2034 22923 990 682 5424 614 1251 552 4521 119 4703 41778 2035 23344 999 694 5683 635 1299 571 4692 124 4885 42926

Note:

(R) Actual traffic in 2012; (M) Traffic for 2012 obtained from the traffic model and the opening of the Shaozhu Expressway was taken into account; (2) The openings of the Dongyong Expressway, the Hangzhou Bay-Xiaoshan Channle, and the Hangzhou Bay-Shaoxing Channel were taken into account for 2013; (3) The opening of the coastal expressway and expansion of the Hangjinqu Expressway were taken into account for 2016; (4) The openings of the Hangshaotai Expressway and no.2 Hangzhou Loop Expressway were taken into account for 2019; (5) The section flow includes free vehicles that account for 1%.

102 APPENDIX II TRAFFIC STUDY REPORT

4.2 Revenue Predictions for Expressway in Project (Basic Case Scenario)

Table 4-3 gives the revenue forecast of the base case scenario for future years on the assumption that the toll rates will remain the same as in the base year on the basis of the section flow obtained from the forecasts using the transport model and the average toll rates for different types of vehicles in the base year obtained from statistics. These forecasts have already taken into account the exemption of tolls for passenger cars during public holidays.

Table 4-3 Revenue forecast for Jinhua section of Ningbo-Jinhua Expressway (base case scenario)

Year Average daily revenue Annual revenue Annual growth rate (in RMB10,000) 2012(R) ¥632,462 ¥23,148 2012(M) ¥632,581 ¥23,152 2013(2) ¥671,790 ¥24,520 5.91% 2014 ¥730,467 ¥26,662 8.73% 2015 ¥791,809 ¥28,901 8.40% 2016(3) ¥855,000 ¥31,293 8.28% 2017 ¥923,362 ¥33,703 7.70% 2018 ¥997,184 ¥36,397 7.99% 2019(4) ¥1,102,859 ¥40,254 10.60% 2020 ¥1,191,082 ¥43,594 8.30% 2021 ¥1,254,116 ¥45,775 5.00% 2022 ¥1,320,491 ¥48,198 5.29% 2023 ¥1,390,371 ¥50,749 5.29% 2024 ¥1,463,948 ¥53,580 5.58% 2025 ¥1,541,422 ¥56,262 5.00% 2026 ¥1,593,841 ¥58,175 3.40% 2027 ¥1,648,052 ¥60,154 3.40% 2028 ¥1,704,108 ¥62,370 3.68% 2029 ¥1,763,670 ¥64,374 3.21% 2030 ¥1,885,884 ¥68,835 6.93% 2031 ¥1,963,151 ¥71,655 4.10% 2032 ¥2,046,446 ¥74,900 4.53% 2033 ¥2,126,948 ¥77,634 3.65% 2034 ¥2,196,990 ¥80,190 3.29% 2035 ¥2,266,169 ¥82,715 3.15%

Note: 10

Average daily revenue= ∑ Vehicle Type ((weighted average traffic volume – toll free vehicle) * average toll rate)

103 APPENDIX II TRAFFIC STUDY REPORT

4.3 Project Sensitivity Analysis

4.3.1 Impacts on Revenue from Cancellation of Discounts for Container Trucks (Medium Case Scenario)

Container trucks trailing from or to the Beilun Port are offered a 30% discount of tolls and the policy is intended to foster maritime transportation in Zhejiang and attract more container trucks to the Beilun Port. Since no discounts are granted to container trucks in the adjacent areas of Zhejiang, the consulting firm believes that the policy is likely to end at a certain level of development of maritime transport. Under a conservative scenario, the project firm assumes that the policy will end in 2020 and container trucks will be charged tolls by weight. The revenue on the assumption of the cancellation of such discounts are shown in Table 4-4.

Table 4-4 Revenue forecast for Jinhua section of the Ningbo-Jinhua Expressway (medium case scenario)

Year Average daily revenue Annual revenue Annual growth rate (in RMB10,000) 2012(R) ¥632,462 ¥23,148 2012(M) ¥632,581 ¥23,152 2013(2) ¥671,790 ¥24,520 5.91% 2014 ¥730,467 ¥26,662 8.73% 2015 ¥791,809 ¥28,901 8.40% 2016(3) ¥855,000 ¥31,293 8.28% 2017 ¥923,362 ¥33,703 7.70% 2018 ¥997,184 ¥36,397 7.99% 2019(4) ¥1,102,859 ¥40,254 10.60% 2020 ¥1,191,082 ¥43,594 8.30% 2021 ¥1,315,112 ¥48,002 10.11% 2022 ¥1,384,595 ¥50,538 5.28% 2023 ¥1,457,738 ¥53,207 5.28% 2024 ¥1,534,738 ¥56,171 5.57% 2025 ¥1,615,806 ¥58,977 4.99% 2026 ¥1,670,721 ¥60,981 3.40% 2027 ¥1,727,512 ¥63,054 3.40% 2028 ¥1,786,231 ¥65,376 3.68% 2029 ¥1,848,550 ¥67,472 3.21% 2030 ¥1,977,448 ¥72,177 6.97% 2031 ¥2,059,336 ¥75,166 4.14% 2032 ¥2,147,479 ¥78,598 4.57% 2033 ¥2,233,046 ¥81,506 3.70% 2034 ¥2,307,434 ¥84,221 3.33% 2035 ¥2,380,902 ¥86,903 3.18%

104 APPENDIX II TRAFFIC STUDY REPORT

4.3.2 Impacts of Higher Toll Rates on Revenue (Optimistic Scenario)

Given the changes in toll rates over the past decade and inflation levels in Zhejiang, the toll rates are expected to rise in the future. The revenue generated in the sensitivity test, where the consulting firm assumes that the toll rates will rise by 3% every five years in the future and container trucks will enjoy no discounts from 2020 onwards are given in Table 4-5.

Table 4-5 Revenue forecast for Jinhua section of the Ningbo-Jinhua Expressway (optimistic scenario)

Year Average daily revenue Annual revenue Annual growth rate (in RMB10,000) 2012(R) ¥632,462 ¥23,148 2012(M) ¥632,581 ¥23,152 2013(2) ¥671,790 ¥24,520 5.91% 2014 ¥730,467 ¥26,662 8.73% 2015 ¥791,809 ¥28,901 8.40% 2016(3) ¥880,650 ¥32,232 11.52% 2017 ¥951,063 ¥34,714 7.70% 2018 ¥1,027,100 ¥37,489 7.99% 2019(4) ¥1,135,944 ¥41,462 10.60% 2020 ¥1,226,815 ¥44,901 8.30% 2021 ¥1,395,202 ¥50,925 13.41% 2022 ¥1,468,917 ¥53,615 5.28% 2023 ¥1,546,514 ¥56,448 5.28% 2024 ¥1,628,204 ¥59,592 5.57% 2025 ¥1,714,208 ¥62,569 4.99% 2026 ¥1,825,642 ¥66,636 6.50% 2027 ¥1,887,699 ¥68,901 3.40% 2028 ¥1,951,863 ¥71,438 3.68% 2029 ¥2,019,960 ¥73,729 3.21% 2030 ¥2,160,811 ¥78,870 6.97% 2031 ¥2,317,800 ¥84,600 7.27% 2032 ¥2,417,007 ¥88,462 4.57% 2033 ¥2,513,313 ¥91,736 3.70% 2034 ¥2,597,037 ¥94,792 3.33% 2035 ¥2,679,727 ¥97,810 3.18%

105 APPENDIX II TRAFFIC STUDY REPORT

4.4 IMPACT ASSESSMENT OF NEW HIGHWAYS AND POLICY CHANGES

Based on the analyses, the years in which moderate impacts can be observed on the Project Expressway are 2012 and 2019. In the following sections, mainly the forecasted impacts in 2012 and 2019 of the expected opening of new highways are discussed.

(1) The Opening of Shaoxing-Zhuji Expressway in 2012

In the year 2012, the major event that has an impact on the Project Expressway was the opening of Shaoxing-Zhuji Expressway. The expressway connects Shaoxing and Zhuji, and it is connected with several other highways i.e. Shangyu-Sanmen Expressway, Hangzhou-Yongjin Expressway, Hangzhou Bay Shaoxing Bridge, Hangjinqu Expressway and Zhuji-Yongjia Expressway. The Shaoxing-Zhuji Expressway basically runs parallel to the Project Expressway, but the average distance between the Project Expressway and that expressway is over 50 km. Figure 4-1 illustrates the spatial relationship between Shaoxing-Zhuji Expressway and the Project Expressway.

Figure 4-1 Spatial Relationship between Shaoxing-Zhuji Expressway and Project Expressway

Hangzhou

Shaoxing-Zhuji Expwy. Zhuji Shangyu C E

A B Zhuji-Yongjia Expwy. F Shangyu-Sanmen Expwy. H Ningbo-Jinhua Expwy. Ningbo&Zhoushan

Quzhou&Jinhua D G

Wenzhou Taizhou

Based on our analyses, due to the opening of the Shaoxing-Zhuji Expressway, part of the volume that originally chose the route A↔B↔F↔E would be diverted to the route A↔C↔E, and that amounts to 3.5% of the total volume. As the Shaoxing-Zhuji Expressway is a viable option from A to E, part of the vehicles will not travel on the Project Expressway at all, which will result in -1.3% and -1.8% decreases in total volume and revenue respectively.

106 APPENDIX II TRAFFIC STUDY REPORT

(2) The opening of Hangzhou-Shaoxing-Taizhou Expressway and 2nd Beltway of Hangzhou in 2019

In the year 2019, the major event influencing the Project Expressway will be the opening of Hangzhou-Shaoxing-Taizhou Expressway and 2nd Beltway of Hangzhou. The design of Hangzhou- Shaoxing-Taizhou Expressway is still not finalized, after consulting with the staff of the Company, the consulting firm assumes that Hangzhou-Shaoxing-Taizhou Expressway will, to the north, connect to Hangzhou-Ningbo Expressway through Hangzhou Bay Xiaoshan Corridor and, to the south, connect to Baishuiyang of Taizhou-Jinhua Expressway over Shaoxing-Zhuji Expressway and Yongjin Expressway. Hangzhou-Shaoxing-Taizhou Expressway intersects with the Project Expressway and runs roughly parallel to Shangyu-Sanmen Expressway and Zhuji-Yongjia Expressway. Figure 4-2 illustrates the spatial relationship between Hangzhou-Shaoxing-Taizhou Expressway and the Project Expressway.

Figure 4-2 Spatial relationship between Hangzhou-Shaoxing-Taizhou Expressway and Project Expressway

Hangzhou

Shaoxing-Zhuji Expwy. Zhuji Shangyu C I E

A B Zhuji-Yongjina Expwy. J F Shangyu-Sanmen Expwy. H Ningbo-Jinhua Expwy. Ningbo&Zhoushan D K G Quzhou&Jinhua

Wenzhou Taizhou Taizhou

Based on our analyses, due to the opening of the Hangzhou-Shaoxing-Taizhou Expressway, some of the traffic to Taizhou that originally chose the route A↔B↔D would be diverted to the route A↔B↔J↔K, and that amounts to a 63veh/day increase of traffic on a short section of project. Additionally, some of the traffic choosing route C↔B↔D would travel on route C↔B↔J↔K, the diverted traffic is 81veh/day. Because of the opening of the Hangzhou-Shaoxing-Taizhou Expressway, we forecast +2.9% and +2.7% increases in total volume and revenue respectively.

107 APPENDIX II TRAFFIC STUDY REPORT

(3) Highway Openings in Other Years

Besides the major events in 2012 and 2019, there will be other new highways expected to be open in 2013 and 2015. However, these highways’ impacts on the Project Expressway are too insignificant to be accounted for. Summarized in table 4-6 are the major highway network changes and their forecasted impacts on the Project Expressway.

Table 4-6 Impacts of Major Highway Network Changes

Impact on Impact on Year Events Traffic Revenue

2012 Opening of Shaoxing-Zhuji Expressway –1.3% –1.8%

2013 Opening of Hangzhou Bay Xiaoshan Corridor, –1.7% –1.4% Hangzhou Bay Shaoxing Bridge and Dongyang- Yongkang Expressway

2015 Opening of 2nd Hangzhou-Ningbo Expressway –0.3% –0.3%

2019 Opening of 2nd Hangzhou Beltway and +2.9% +2.7% Hangzhou-Shaoxing-Taizhou Expressway

Source: Wilbur Smith Associates, 2013

(4) Policy of Toll Exemption for Private Passenger Cars on Holidays

A national policy was introduced in 2012 exempting all tolls for private passenger cars on 20 days of 4 festivals i.e. Qingming Festival, May 1st Festival, National Day and Spring Festival. This policy is assumed to be permanent and will have a negative effect on revenue. Based on the comparison between modeled revenue and the actual revenue, the 7-day holiday of National day in 2012 reduced the revenue by 1.1%, and the estimated revenue loss for the 20 days of holidays will be 3% annually for 2013 and each year thereafter.

108 APPENDIX II TRAFFIC STUDY REPORT

5 SUMMARY

The Jinhua section of the Ningbo-Jinhua Expressway in Zhejiang is 69.75 km long with seven toll stations and connects the Zhuyong Expressway at Huailu Interchange. On the basis of the station- to-station data on the Project Expressway collected from Zhejiang Highway Toll Clearing Centre and the historical traffic data obtained from the Project Expressway company, we have generated traffic and revenue forecast from 2012 to 2035. It is worth noting that due to the time constraint of the study and the limitation of the data collected, the forecasts may deviate from the actual conditions, especially for the long term forecasts. On the basis of the latest data collected, we have made the following forecasts:

1) From 2012 to 2035, the traffic on Project Expressway will increase from the current volume of 12,091 vehicles/day to 42,926 vehicles/day, equivalent to a 255% increase.

2) During the same period, the toll revenue of Project Expressway will rise from RMB231 million in 2012 to RMB827 million per year and the total revenue for the 24 years from 2012 to 2035 will reach RMB12.44 billion.

3) The total revenue for the 24 years from 2012 to 2035 will reach RMB12.91 billion with the cancellation of the discounts for container trucks from 2020 onwards (the medium case scenario).

4) The total revenue for the 24 years from 2012 to 2035 will reach RMB13.94 billion on the assumptions that the toll rates will increase by 3% every five years in the future and container trucks will enjoy no toll discounts from 2020 onwards (the optimistic scenario).

109 APPENDIX III LETTERS RELATING TO DISCOUNTED FUTURE ESTIMATED CASH FLOWS

Set out below are the text of the letters received from the reporting accountant, Deloitte Touche Tohmatsu, Certified Public Accountants, Hong Kong and the text of the letter from the Board, both relating to the discounted future estimated cash flows, for, amongst other purposes, incorporation in the announcement of the Company dated 20 March 2013 published in connection with the Acquisitions.

A. REPORT FROM REPORTING ACCOUNTANT ON DISCOUNTED FUTURE ESTIMATED CASH FLOWS IN CONNECTION WITH THE VALUATION OF THE ENTIRE EQUITY INTEREST OF THE TARGET COMPANY

20 March 2013

The Board of Directors Zhejiang Expressway Co., Ltd. 12/F, Block A, Dragon Century Plaza 1 Hangda Road Hangzhou City, Zhejiang Province PRC 310007

ACCOUNTANTS’ REPORT ON CALCULATIONS OF DISCOUNTED FUTURE ESTIMATED CASH FLOWS IN CONNECTION WITH THE VALUATION OF THE ENTIRE EQUITY INTEREST OF ZHEJIANG JINHUA YONGJIN EXPRESSWAY CO., LTD., A 23.45% OWNED ASSOCIATE OF ZHEJIANG EXPRESSWAY CO., LTD. (THE “COMPANY”)

We have examined the calculations of the discounted future estimated cash flows on which the valuation prepared by Jones Lang LaSalle Corporate and Appraisal Advisory Limited dated 19 March 2013, in respect of the entire equity interest in Zhejiang Jinhua Yongjin Expressway Co., Ltd (“Yongjin Expressway”), a 23.45% owned associate of the Company, as at 30 September 2012 (the “Valuation”) is based. Yongjin Expressway is a company established in the PRC whose principal asset is the Jinhua section of the Ningbo-Jinhua Expressway. The Valuation based on the discounted future estimated cash flows is regarded as a profit forecast under Rule 14.61 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and will be included in an announcement dated 20 March 2013 to be issued by the Company in connection with the acquisition of an aggregate 76.55% equity interest in Yongjin Expressway (the “Announcement”).

110 APPENDIX III LETTERS RELATING TO DISCOUNTED FUTURE ESTIMATED CASH FLOWS

Directors’ responsibility for the discounted future estimated cash flows

The directors of the Company are responsible for the preparation of the discounted future estimated cash flows in accordance with the bases and assumptions determined by the directors and set out in the Announcement (the “Assumptions”). This responsibility includes carrying out appropriate procedures relevant to the preparation of the discounted future estimated cash flows for the Valuation and applying an appropriate basis of preparation; and making estimates that are reasonable in the circumstances.

Reporting accountants’ responsibility

It is our responsibility to form an opinion on the arithmetical accuracy of the calculations of the discounted future estimated cash flows on which the Valuation is based and to report solely to you, as a body, as required by Rule 14.62(2) of the Listing Rules, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

Our engagement was conducted in accordance with Hong Kong Standard on Assurance Engagements 3000 “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information” issued by the Hong Kong Institute of Certified Public Accountants. This standard requires that we comply with ethical requirements and plan and perform the assurance engagement to obtain reasonable assurance on whether the discounted future estimated cash flows, so far as the calculations are concerned, have been properly compiled in accordance with the Assumptions. Our work does not constitute any valuation of Yongjin Expressway.

Because the Valuation relates to discounted future estimated cash flows, no accounting policies of the Company have been adopted in its preparation. The Assumptions include hypothetical assumptions about future events and management actions which cannot be confirmed and verified in the same way as past results and these may or may not occur. Even if the events and actions anticipated do occur, actual results are still likely to be different from the Valuation and the variation may be material. Accordingly, we have not reviewed, considered or conducted any work on the reasonableness and the validity of the Assumptions and do not express any opinion whatsoever thereon.

Opinion

Based on the foregoing, in our opinion, the discounted future estimated cash flows, so far as the calculations are concerned, have been properly compiled, in all material respects, in accordance with the Assumptions.

Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong

111 APPENDIX III LETTERS RELATING TO DISCOUNTED FUTURE ESTIMATED CASH FLOWS

B. LETTER FROM THE BOARD ON DISCOUNTED FUTURE ESTIMATED CASH FLOWS IN CONNECTION WITH THE VALUATION OF THE ENTIRE EQUITY INTEREST OF THE TARGET COMPANY

Listing Division The Stock Exchange of Hong Kong Limited 11/F., One International Finance Centre, 1 Harbour View Street, Central, Hong Kong

20 March 2013

Dear Sirs,

Discloseable and Connected Transactions – Acquisition of an aggregate 76.55% Equity Interest in the Target Company

We refer to the valuation report dated 19 March 2013 (the “Valuation Report”) and prepared by Jones Lang LaSalle Corporate and Appraisal Advisory Limited (the “Independent Valuer”) in relation to the valuation of the entire equity interest of Zhejiang Jinhua Yongjin Expressway Co., Ltd. (the “Target Company”), the valuation of which constitutes a profit forecast under Rule 14.61 of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited.

We have reviewed and discussed the bases and assumptions upon which the valuation of the entire equity interest of the Target Company has been made with the Independent Valuer, and reviewed the valuation for which the Independent Valuer is responsible. We have also considered the report from, Deloitte Touche Tohmatsu, dated 20 March 2013 regarding whether the discounted future estimated cash flows, so far as the calculations are concerned, have been properly compiled in accordance with the bases and assumptions set out in the Valuation Report. We have noted that the discounted future estimated cash flows do not involve the adoption of accounting policy.

On the basis of the foregoing, we are of the opinion that Valuation Report and the valuation therein prepared by the Independent Valuer have been made after due and careful enquiry.

Yours faithfully, On behalf of the Board ZHEJIANG EXPRESSWAY CO., LTD. ZHAN Xiaozhang Chairman

112 APPENDIX IV GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

This Circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this Circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this Circular misleading.

2. DISCLOSURE OF INTERESTS OF DIRECTORS, SUPERVISORS AND CHIEF EXECUTIVES

(a) Interests in the Company and its associated corporations

As at the Latest Practicable Date, none of the Directors, supervisors and chief executives of the Company had an interest or short position in any shares, underlying shares or equity derivatives or debentures of the Company or any associated corporations (within the meaning of Part XV of the SFO) which is required to be (i) notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which the Directors, supervisors or chief executives of the Company was taken or deemed to have under such provisions of the SFO); or (ii) entered in the register kept by the Company pursuant to section 352 of the SFO; or (iii) notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies.

As at the Latest Practicable Date, none of the Directors, supervisors or chief executives of the Company or their spouses or children under 18 years of age were granted or had exercised any right to subscribe for any equity or debt securities of the Company or any of its associated corporations (within the meaning of Part XV of the SFO).

(b) Other interests

As at the Latest Practicable Date, so far is known to the Directors, none of the Directors and supervisors of the Company was materially interested in any contract or arrangement entered into by the Company or any of its subsidiaries which was subsisting and significant in relation to the business of the Group taken as a whole.

3. DISCLOSURE OF INTERESTS OF SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, save as disclosed below, so far as is known to the Directors or chief executives of the Company, no other person had an interest or short position in the Shares and underlying Shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or were required to be notified to the Company and the Stock Exchange pursuant to section 324 of the SFO, or, who is, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any members of the Group.

113 APPENDIX IV GENERAL INFORMATION

Percentage Total of the issued interests in number share capital of ordinary shares of the Company Name of Shareholder Capacity of the Company (domestic shares)

Communications Group Beneficial owner 2,909,260,000 100%

Percentage Total of the issued interests in number share capital of ordinary shares of the Company Name of Shareholder Capacity of the Company (H Shares)

JP Morgan Chase & Co Beneficial owner, 159,566,570 (L) 11.13% (L) investment manager and custodian 95,869,024 (P) 6.69% (P) corporation/approved lending agent

BlackRock, Inc. Interest of controlled 128,668,922 (L) 8.97% (L) corporations

The letter “L” denotes a long position. The letter “P” denotes interest in a lending pool.

4. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors and their respective associates had any interest in a business, apart from the business of the Company, which competes or may compete with the business of the Company or has any other conflict of interest with the Company which would be required to be disclosed under Rule 8.10 of the Listing Rules.

5. INTEREST IN CONTRACT OR ARRANGEMENT

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any contract, transaction or assets which have been acquired or disposed of by, or leased to, or which are proposed to be acquired or disposed of by, or leased to, any member of the Group since 31 December 2012, being the date to which the latest published audited accounts of the Group were made up.

114 APPENDIX IV GENERAL INFORMATION

6. SERVICE CONTRACTS OF THE DIRECTORS

As at the Latest Practicable Date, none of the Directors and supervisors of the Company entered or proposed to enter into any service contract with the Group which is not determinable by the Group within one year without payment of compensation other than statutory compensation.

7. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2012, the date to which the latest published audited accounts of the Company were made up.

8. EXPERTS AND CONSENTS

The following are the qualifications of the experts who have been named in this Circular or have given opinion or advice contained in this Circular:

Name Qualification

ABCI Capital Limited a corporation licensed by Securities and Futures Commission to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO

Deloitte certified public accountants

Jones Lang LaSalle a Hong Kong qualified independent valuer

Wilbur Smith traffic consultants

ABCI Capital Limited, Deloitte, Jones Lang LaSalle and Wilbur Smith are collectively referred to as the “Experts” hereinafter.

As at the Latest Practicable Date, none of the Experts has any shareholding in any member of the Group nor has any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

Each of the Experts has given and has not withdrawn its written consent to the issue of this Circular with the inclusion of its letter or report and references to its names in the form and context in which they appear.

The letter and recommendation from ABCI Capital Limited are set out on pages 28 to 42 of this Circular and are given for incorporation herein.

The letter from Jones Lang LaSalle is set out in Appendix I of this Circular and is given for incorporation herein.

115 APPENDIX IV GENERAL INFORMATION

The letter from Wilbur Smith is set out in Appendix II of this Circular and is given for incorporation herein.

The letter from Deloitte is set out in Appendix III of this Circular and is given for incorporation herein.

None of the Experts has, or has had, direct or indirect interest in any assets which have been acquired or disposed of by, or leased to, any member of the Group or are proposed to be acquired or disposed of by, or leased to, any member of the Group since 31 December 2012, the date to which the latest published audited accounts of the Group was made up.

9. DOCUMENTS FOR INSPECTION

A copy of the following documents will be available for inspection at the office of Herbert Smith Freehills at 23rd Floor, Gloucester Tower, 15 Queen’s Road Central, Hong Kong during normal business hours on any weekday (except public holidays) for a period of 14 days from the date hereof:

(a) the memorandum and articles of association of the Company;

(b) the audited consolidated accounts of the Group for each of the two financial years ended 31 December 2011 and 2012;

(d) the Yiwu Agreement;

(e) the Maintenance Work Agreement;

(f) the Loan Agreements;

(g) the Credit Agreement;

(h) the letter from the Independent Board Committee, as set out on page 27 of this Circular;

(i) the letter from the Independent Financial Adviser, as set out on pages 28 to 42 of this Circular;

(j) the Valuation Report, the text of which are set out in Appendix I to this Circular;

(k) the Traffic Study Report, the text of which are set out in Appendix II to this Circular;

116 APPENDIX IV GENERAL INFORMATION

(l) the letters from Deloitte and the Board on discounted future estimated cash flows in connection with the valuation of the entire equity interest in the Target Company, the text of each of which is set out in Appendix III to this Circular;

(m) the written consents referred to in the paragraph headed “Experts and Consents” above; and

(n) this Circular.

117 NOTICE OF AGM

(A joint stock limited company incorporated in the People’s Republic of China with limited liability) (Stock Code: 0576)

NOTICE OF 2012 ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT the 2012 annual general meeting (the “AGM”) of Zhejiang Expressway Co., Ltd. (the “Company”) will be held at 3 p.m. on Friday, June 21, 2013 at 12/F, Block A, Dragon Century Plaza, 1 Hangda Road, Hangzhou, Zhejiang Province, the People’s Republic of China (the “PRC”), for the purpose of considering and, if thought fit, passing with or without modification or amendment the following resolutions:

AS ORDINARY RESOLUTIONS

1. to consider and approve the report of the directors of the Company (the “Directors”) for the year 2012;

2. to consider and approve the report of the supervisory committee of the Company for the year 2012;

3. to consider and approve the audited financial statements of the Company for the year 2012;

4. to consider and approve final dividend of Rmb24 cents per share in respect of the year ended December 31, 2012;

5. to consider and approve the final accounts of the Company for the year 2012 and the financial budget of the Company for the year 2013;

6. to consider and approve the re-appointment of Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong as the Hong Kong auditors of the Company, and to authorize the board of directors of the Company (the “Board”) to fix their remuneration; and

7. to consider and approve the re-appointment of Pan China Certified Public Accountants as the PRC auditors of the Company, and to authorize the Board to fix their remuneration.

8. to approve and confirm

a. the agreement dated March 20, 2013 (the “Communications Group Agreement”) entered into between the Company and Zhejiang Communications Investment Group Co., Ltd. (a copy of which is produced to the AGM marked “1” and initialed by the chairman of the AGM for the purpose of identification), and the terms and conditions thereof and the transactions contemplated thereunder and the implementation thereof;

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b. the agreement dated March 20, 2013 (the “Yiwu Agreement”) entered into between the Company and Yiwu Communications Development Co., Ltd. (a copy of which has been produced to the AGM marked “2” and initialed by the chairman of the AGM for the purpose of identification), and the terms and conditions thereof and the transactions contemplated thereunder and the implementation thereof;

and to approve, ratify and confirm the authorization to any one of the Directors, or any other person authorized by the Board from time to time, for and on behalf of the Company, among other matters, to sign, seal, execute, perfect, perform and deliver all such agreements, instruments, documents and deeds, and to do all such acts, matters and things and take all such steps as he or she or they may in his or her or their absolute discretion consider to be necessary, expedient, desirable or appropriate to give effect to and implement the Communications Group Agreement or the Yiwu Agreement or both of them and the transactions contemplated thereunder and all matters incidental to, ancillary to or in connection thereto, including agreeing and making any modifications, amendments, waivers, variations or extensions of the Communications Group Agreement or the Yiwu Agreement or the transactions contemplated thereunder; and

AS SPECIAL RESOLUTIONS

9. to approve and confirm the proposed issue of domestic corporate bonds by the Company with an aggregate principal amount of up to RMB1 billion (“Domestic Corporate Bonds”), on the conditions set forth below:

(1) Issuer: The Company.

(2) Place of issue: The PRC.

(3) Aggregate principal amount: Up to RMB1 billion, which can be issued in single or multiple tranche(s) subject to the approval of China Securities Regulatory Commission (the “CSRC”). Subject to the granting of authority by the shareholders of the Company (the “Shareholders”) to the Board at the AGM, details of issue size and tranches are intended to be determined by the Board according to the financial requirements of the Company and market conditions prevailing at the time of issue.

(4) Arrangement for issue to The Domestic Corporate Bonds will not be offered to Shareholders: the Shareholders on a preferential basis.

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(8) Term of validity of the The proposed Shareholders’ resolutions to be passed resolutions: at the AGM in respect of the proposed issue of Domestic Corporate Bonds, if passed, shall be valid for 30 months from the date of passing of the relevant resolutions at the AGM. and to approve and confirm the granting of authority to the Board to deal with all matters relating to the proposed issue and listing of the Domestic Corporate Bonds in the absolute discretion of the Board in accordance with the applicable laws and regulations (including, among others, the Company Law of the PRC, the Securities Law of the PRC and the Tentative Methods on Issue of Corporate Bonds (公司債券發行試點辦法) promulgated by the CSRC) and the articles of association of the Company, including, but not limited to the following:

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issue size, maturity, type of bonds, interest rate and method of determination, timing of issue (including whether to issue in tranches and their respective size and maturity), security plan, whether to allow repurchase and redemption, use of proceeds, rating, subscription method, term and method of repayment of principal and interests, listing and all other matters relating to the issue and listing of the Domestic Corporate Bonds;

(3) to appoint a trustee for the proposed issue of the Domestic Corporate Bonds, to execute relevant trust deed and to determine rules for meetings of holders of the Domestic Corporate Bonds;

(a) not to declare any profit distributions to the Shareholders;

(b) to postpone the implementation of capital expenditure projects such as material investments, acquisitions or mergers;

(c) to reduce or discontinue the payment of salaries and bonuses of the Directors and senior management of the Company; and

(d) not to transfer or second away any key officers of the Company;

(6) to deal with any other matters relating to the proposed issue and listing of the Domestic Corporate Bonds;

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(8) at the same time as the authorities mentioned under paragraphs (1) – (6) above are granted, the Board shall be authorised to delegate to Mr. Wu Junyi the powers to deal with all specific matters relating to the proposed issue and listing of the Domestic Corporate Bonds within the limit of the authorities granted to the Board as mentioned above.

By order of the board of directors Zhejiang Expressway Co., Ltd. Tony Zheng Company Secretary

Hangzhou, the PRC,

May 7, 2013

Notes:

1. The above mentioned resolution No. 8 shall be approved by independent shareholders as required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. Zhejiang Communications Investment Group Co., Ltd. and its associates will abstain from voting in relation to such resolution. Details regarding such resolution and the above mentioned resolution No. 9 are set out in the circular of the Company dated May 7, 2013.

2. Registration procedures for attending the AGM

(1) Holders of H shares of the Company (“H Shares”) and domestic shares of the Company (“Domestic Shares”) intending to attend the AGM should return the reply slip for attending the AGM to the Company by post or by facsimile (address and facsimile numbers are shown in paragraph 7(2) below) such that the same shall be received by the Company on or before May 31, 2013.

(2) A shareholder or his/her/its proxy should produce proof of identity when attending the AGM. If a corporate shareholder appoints its legal representative to attend the meeting, such legal representative shall produce proof of identity and a copy of the resolution of the board of directors or other governing body of such shareholder appointing such legal representative to attend the meeting.

3. Proxy

(1) A shareholder eligible to attend and vote at the AGM is entitled to appoint, in written form, one or more proxies to attend and vote at the AGM on behalf of him/her/it. A proxy need not be a shareholder of the Company.

(2) A proxy shall be appointed by a written instrument signed by the appointor or an attorney authorised by him/her/ it for such purpose. If the appointor is a corporation, the same shall be affixed with the seal of such corporation, or signed by its director(s) or duly authorized representative(s). If the instrument appointing a proxy is signed by a person authorized by the appointor, the power of attorney or other authorization document(s) shall be notarized.

(3) To be valid, the power of attorney or other authorization document(s) (which have been notarized) together with the completed form of proxy must be delivered, in the case of holders of Domestic Shares, to the Company at the address shown in paragraph 7(2) below and, in the case of holders of H Shares, to Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Center, 183 Queen’s Road East, Hong Kong, at least 24 hours before the time designated for holding of the AGM.

(4) Any vote of the shareholders of the Company present in person or by proxy at the AGM must be taken by poll.

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4. Book closing period

For the purpose of the AGM and to determine the shareholders who qualify for the proposed final dividend, the register of members holding H shares of the Company will be closed from May 22, 2013 to June 20, 2013 (both days inclusive), and from June 27, 2013 to July 2, 2013 (both days inclusive).

5. Last day of transfer and record date

Holders of H Shares who intend to attend the AGM and qualify for the proposed final dividend must deliver all transfer instruments and the relevant shares certificates to Computershare Hong Kong Investor Services Limited at Rooms 1712- 1716, 17/F, Hopewell Center, 183 Queen’s Road East, Hong Kong, at or before 4:30p.m. on May 21, 2013 and on June 26, 2013 respectively.

For the purpose of the AGM and qualify for the proposed final dividend, the record date will be May 27, 2013 and July 2, 2013 respectively.

6. Dividend Payable date

Upon relevant approval by shareholders at the AGM, the final dividend is expected to be paid out on July 31, 2013.

7. Miscellaneous

(1) The AGM will not last for more than one day. Shareholders who attend shall bear their own traveling and accommodation expenses.

(2) The registered address of the Company is:

12/F, Block A, Dragon Century Plaza 1 Hangda Road Hangzhou, Zhejiang 310007 People´s Republic of China Telephone No.: (+86)-571-8798 7700 Facsimile No.: (+86)-571-8795 0329

As at the date of this notice, the executive directors of the Company are: Mr. ZHAN Xiaozhang, Ms. LUO Jianhu and Mr. DING Huikang; the non-executive directors of the Company are: Messrs. LI Zongsheng, WANG Weili and WANG Dongjie; and the independent non-executive directors of the Company are: Messrs. ZHANG Junsheng, ZHOU Jun and PEI Ker-Wei.

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