Building a renowned brand for expressway operations and service in China CONTENTS 2 Definition of Terms 4 Company Profile 5 Corporate Structure of the Group 6 Review of Major Corporate Events 8 Particulars of Major Road Projects 10 Financial and Operating Highlights 13 Chairman’s Statement 17 Management Discussion and Analysis 32 Principal Risks and Uncertainties 35 Corporate Governance Report 49 Directors, Supervisors and Senior Management Profiles 65 Report of the Directors 75 Report of the Supervisory Committee 77 Connected Transactions 86 Independent Auditor’s Report 92 Consolidated Financial Statements & Notes 245 Independent Auditor’s Report (Issued by a third country auditor registered with the UK Financial Reporting Council) 251 Corporate Information 253 Location Map of Expressways in Zhejiang Province Definition of Terms Audit Committee the audit committee of the Company Board the board of directors of the Company Company or Zhejiang Zhejiang Expressway Co., Ltd., a joint stock limited company incorporated in Expressway the PRC with limited liability on March 1, 1997 Communications Group Zhejiang Communications Investment Group Co., Ltd. (浙江省交通投資集 團有限公司), a wholly State-owned enterprise established in the PRC, on December 29, 2001 and the controlling shareholder of the Company Connected Person has the meaning ascribed to it under the Listing Rules Controlling Shareholder has the meaning ascribed to it under the Listing Rules Directors the directors of the Company Expressway Mechanical the various expressway mechanical and electrical engineering agreements and Electrical dated August 7, 2018 entered into between Zhejiang Information (Zhejiang Engineering Agreements Expressway Information Engineering Technology Co., Ltd.) on the one hand and the Company and relevant subsidiaries of the Company (namely Shangsan Co, Hanghui Co, Jiaxing Co, Jinhua Co and Huihang Co) on the other hand, pursuant to which the Company and certain of its subsidiaries agreed to purchase expressway mechanical and electrical engineering services from Zhejiang Information Expressway Monitoring the various expressway monitoring system software maintenance agreements System Software dated August 7, 2018 entered into between Zhejiang Information on the one Maintenance hand and the Company and relevant subsidiaries of the Company (namely Agreements Shangsan Co, Hanghui Co, Jiaxing Co and Jinhua Co) on the other hand, pursuant to which the Company and certain of its subsidiaries agreed to purchase expressway monitoring system software maintenance services from Zhejiang Information GDP gross domestic product Group the Company and its subsidiaries H Shares the overseas listed foreign shares of Rmb1.00 each in the share capital of the Company which are primarily listed on the Hong Kong Stock Exchange and traded in Hong Kong dollars since May 15, 1997 Hanghui Co Zhejiang Hanghui Expressway Co., Ltd. (浙江杭徽高速公路有限公司), a 88.674% owned subsidiary of the Company Huihang Co Huangshan Yangtze Huihang Expressway Co., Ltd (黃山長江徽杭高速公路有限 責任公司), a wholly-owned subsidiary of the Company Hong Kong Stock The Stock Exchange of Hong Kong Limited Exchange Jiaxing Co Zhejiang Jiaxing Expressway Co., Ltd. (浙江嘉興高速公路有限責任公司), a 99.9995% owned subsidiary of the Company Jinhua Co Zhejiang Jinhua Yongjin Expressway Co., Ltd. (浙江金華甬金高速公路有限公 司), a wholly-owned subsidiary of the Company Listing Rules the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited Period the period from January 1, 2018 to December 31, 2018 PRC the People’s Republic of China 2 Previous Transactions I the agreements entered into within a 12-month period prior to the date of the Expressway Services Agreements between or among the Group and Communications Group’s associates in relation to various information technology services, mechanical and electrical engineering services. For details, please refer to the announcements issued by the Company dated December 22, 2017, January 4, 2018, April 17, 2018 and August 7, 2018, respectively Previous Transactions II the agreements entered into between or among the Group and Communications Group’s associates within a 12-month period prior to the date of the Dedicated Road Maintenance Agreement between or among the Group and Communications Group’s associates in relation to highway operations and maintenance services. For details, please refer to the announcements issued by the Company dated April 8, 2016 and June 23, 2017 respectively Previous Transactions III the agreements entered into within a 12-month period prior to the date of Asphalt Pavement On-site Thermal Regeneration Engineering Agreement for the year of 2018 between or among the Group and Communications Group’s associates in relation to highway operations and maintenance services. For details, please refer to the announcements issued by the Company dated April 8, 2016, June 23 and 26, 2017 and May 28, 2018 respectively Previous Transactions IV the agreements entered into within a 12-month period prior to the date of the Expressway Monitoring System Software Maintenance Agreements and the Expressway Mechanical and Electrical Engineering Agreements between or among the Group and Communications Group’s associates in relation to information technology service and mechanical and electrical engineering services. For details, please refer to the announcements issued by the Company dated December 22, 2017, January 4 and April 17, 2018, respectively Rmb Renminbi, the lawful currency of the PRC SFO Securities and Futures Ordinance (Chapter 571, Laws of Hong Kong) Shangsan Co Zhejiang Shangsan Expressway Co., Ltd. (浙江上三高速公路有限公司), a 73.625% owned subsidiary of the Company Shareholders the shareholders of the Company Shengxin Co Shengxin Expressway Co., Ltd. (浙江紹興嵊新高速公路有限公司), a 50% owned joint venture of the Company Shenjiahuhang Co Zhejiang Shenjiahuhang Expressway Co., Ltd.(浙江申嘉湖杭高速公路有限公 司), a wholly-owned subsidiary of the Company SRCB Shanghai Rural Commercial Bank Co., Ltd. (上海農村商業銀行股份有限公司) a 5.36% owned associate of the Company Supervisory Committee the supervisory committee of the Company Yangtze Financial Yangtze United Financial Leasing Co., Ltd. (長江聯合金融租賃有限公司), a Leasing 13% owned associate of the Company Yuhang Co Zhejiang Yuhang Expressway Co., Ltd. (浙江余杭高速公路有限責任公司), a 51% owned subsidiary of the Company Zheshang Securities Zheshang Securities Co., Ltd. (浙商證券股份有限公司), a 63.74475% owned subsidiary of the Shangsan Co Zhejiang Communications Zhejiang Communications Investment Group Finance Co., Ltd. (浙江省交通投 Finance 資集團財務有限責任公司), a 35% owned associate of the Company Zhoushan Co Zhejiang Zhoushan Bay Bridge Co., Ltd.(浙江舟山跨海大橋有限公司), a 51% owned subsidiary of Shenjiahuhang Co 3 Company Profile Zhejiang Expressway is an infrastructure company principally engaged in investing in, developing and operating of high-grade roads. The Company and its subsidiaries are also engaged in the expressway related development and operation, as well as securities business. Major assets under management of the Group include the 248 km Shanghai-Hangzhou-Ningbo Expressway, the 141 km Shangsan Expressway, the 70 km Jinhua section of Ningbo-Jinhua Expressway, the 122 km Hanghui Expressway and the 82 km Huihang Expressway, ancillary facilities along the five expressways, and Zheshang Securities which was listed on Shanghai Stock Exchange(Stock Code: 601878). Among which, apart from Huihang Expressway which is situated within Anhui Province in the PRC, the rest of the four expressways are situated within Zhejiang Province in the PRC. As at December 31, 2018, total assets of the Company and its subsidiaries amounted to Rmb79,513.15 million. The Company was incorporated on March 1, 1997 as the main vehicle of the Zhejiang Provincial Government for investing in, developing and operating expressways and Class 1 roads in Zhejiang Province. Incorporated on December 29, 2001, Communications Group, the controlling shareholder of the Company, is a provincial-level communications company which is wholly-owned by the State and established by the Zhejiang Provincial Government. It mainly operates a diversity of businesses, such as investment, operations, maintenance, toll collection and ancillary services of expressways; construction and building of transportation project, ocean and coastal transport; as well as real estates. On July 11, 2016, Zhejiang Provincial Party Committee and Zhejiang Provincial Government carried out a merger and restructuring of Communications Group and Zhejiang Railroad Investment Group Co., Ltd. In July 2018, Zhejiang Provincial Party Committee and Zhejiang Provincial Government carried out a merger and restructuring of Communication Group and Zhejiang Commercial Group Co., Ltd. Upon merger and restructuring, Communications Group will be responsible for the investment and financing, construction, operation and management of transport related fundamental facilities including expressways, railroads, key cross-region mass transit railways and integrated transport hubs. The H Shares of the Company, which represent approximately 33% of the issued share capital of the Company, were listed on the Hong Kong Stock Exchange on May 15, 1997, and the Company subsequently obtained a secondary listing on the London Stock Exchange on May 5, 2000. With a solid foundation built on the Group’s expressway business, the Company will expand its main businesses scale, enhance its core competitiveness, and grow its financial and securities business so as to increase its profit contribution to the Group. Looking ahead,