Source - PRN

Zhejiang Expressway Co., Ltd

Achieve Growth

Through Innovation and Prudence

In the first half of 2016, as Zhejiang Province's economy steadily improved, traffic volume on the Group's expressways continued to register healthy organic growth, the Group's toll revenue registered an increase of 6.6% year-on-year. However, due to weak domestic market sentiment and lackluster trading on domestic stock markets, though income from Zheshang Securities' investment banking business experienced significant growth, other business segments of Zheshang Securities recorded varied levels of income decrease year-on-year. Despite that, Zheshang Securities still outperformed the market in general. In conclusion, although the Company saw a year-on-year decrease in profit due to various macro factors, all business segments within the Group remained competitive.

In the second half of the year, in response to the dynamic change of internal and external environment, the Company's management will closely monitor the latest financial policy developments as well as evolving market trends to better formulate future strategic development plans. The Group will look to expand its core expressway business by investing in and acquiring quality toll road assets to further enhance its core competencies while strengthening its securities business and seeking suitable investments and development projects in order to enlarge the asset scale of its core businesses and increase future profitability.

Contents

2016 Interim Results

Business Review

Financial Analysis

Outlook

Disclosure of Interests and Other Matters

Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income

Condensed Consolidated Statement of Financial Position

Condensed Consolidated Statement of Changes in Equity

Condensed Consolidated Statement of Cash Flows

Notes to Condensed Consolidated Financial Statements

Appendices

Corporate Information

Corporate Structure of the Group

Financial Highlights

Location Map of Expressways in Zhejiang Province

2016 Interim Results

The directors (the "Directors") of Zhejiang Expressway Co., Ltd. (the "Company") announced the unaudited consolidated operating results of the Company and its subsidiaries (collectively the "Group") for the six months ended June 30, 2016 (the "Period"), with the basis of preparation as stated in note 1 to the condensed consolidated financial statements set out below.

During the Period, revenue for the Group was Rmb5,337.12 million, representing a decrease of 13.7% over the same period in 2015. Profit for the Period attributable to owners of the Company was Rmb1,368.21 million, representing a decrease of 8.5% year-on-year. Earnings per share for the Period was Rmb31.50 cents (corresponding period in 2015 (Restated): Rmb34.43 cents).

The Directors have recommended to pay an interim dividend of Rmb6 cents per share (corresponding period in 2015: Rmb6 cents), subject to shareholders' approval at the extraordinary general meeting of the Company to be held in due course.

The interim report has not been audited or reviewed by the auditors but has been reviewed by the audit committee of the Company.

Business Review

During the first half of 2016, in response to the complex domestic and overseas environment and continuing downward economic pressure, China initiated a number of measures to expand its overall demand while accelerating the supply-side reform. The economy was stable for the most part and recorded a steady 6.7% year-on-year GDP growth. Meanwhile, Zhejiang Province's economy demonstrated decent growth momentum as it benefited from the continuous rapid growth of the tertiary industry and notable upgrades in its economic structure. Zhejiang Province's first-half GDP recorded a year-on-year increase of 7.7%, one percentage point higher than the national rate.

As Zhejiang Province's economy steadily improved during the Period, traffic volume on the Group's expressways continued to register healthy organic growth. Revenue from the Group's overall operations decreased 13.7% year-on-year to Rmb5,337.12 million, of which Rmb2,537.81 million was generated by the four major expressways operated by the Group, representing an increase of 6.6% year-on-year and 47.6% of the total revenue. Revenue from the Group's toll road-related businesses was Rmb532.11 million, representing a decrease of 43.2% year-on-year and 10.0% of the total revenue. The Group's securities business contributed revenue of Rmb2,152.38 million, representing a decrease of 24.8% year- on-year and 40.3% of the total revenue.

A breakdown of the Group's revenue for the Period is set out below:

For the six months ended June 30,
2016 2015
Rmb'000 Rmb'000
Toll revenue
Shanghai-Hangzhou-Ningbo Expressway 1,620,279 1,500,205
Shangsan Expressway 537,800 496,312
Jinhua section, Ningbo-Jinhua Expressway 160,198 159,848
Hanghui Expressway 219,529 223,488
Toll road-related business revenue
Service areas 521,277 886,397
Advertising 10,829 22,052
External road maintenance - 28,436
Securities business revenue
Commission and fee 1,407,455 2,026,162
Interest 744,925 835,709
Other operation revenue
Hotel operation 43,431 7,266
Property sales 71,397 -
Total revenue 5,337,120 6,185,875

Toll Road Operations

During the Period, driven by Zhejiang Province's notable economic developments in the tertiary services industry and decent growth in fixed asset investment, Zhejiang Province's economy maintained its growth momentum and traffic volume on the Group's expressways registered solid organic growth. The organic traffic volume growth for the Group's four expressways, namely the Shanghai-Hangzhou-Ningbo Expressway, the Shangsan Expressway, the Jinhua Section of the Ningbo-Jinhua Expressway and the Hanghui Expressway, were 8.3%, 8.6%, 8.8% and 5.7%, respectively, with the varied rates of growth due to the different regions where the four expressways are located.

During the Period, as Hangzhou's GDP in the first half of 2016 surged by 10.8% year-on-year, the transportation volume of the city and its surrounding areas saw substantial increase, which resulted in a significant increase in traffic volume along the Shanghai-Hangzhou-Ningbo Expressway. However, the opening of the Hangzhou Xiaoshan Airport Expressway and surrounding elevated highways in early May 2016 caused certain traffic volume diversion for the Qiantang River Second Bridge of the Hangzhou- Ningbo Expressway operated by the Group.

Due to an increase in truck traffic volume, the overall traffic volume of the Shangsan Expressway was higher than expected during the Period.

The Hangzhou-Jinhua-Quzhou Expressway had been closed due to construction for four months starting from June 2015, resulting in a temporary increase of traffic volume on the neighboring Jinhua Section of the Ningbo-Jinhua Expressway. The completion of construction in September 2015 caused the traffic volume of the Jinhua Section of the Ningbo-Jinhua Expressway to fall back significantly. In addition, the Dongyang-Yongkang Expressway was opened to traffic in July 2015 and caused a continuous diversion impact on traffic volume from the Jinhua Section of the Ningbo-Jinhua Expressway. As a result of these factors, there was a decrease in the overall traffic volume on the Jinhua Section of the Ningbo-Jinhua Expressway during the Period.

The Hanghui Expressway registered lower organic growth in traffic volume during the Period, as a result of the sluggish regional economy in the surrounding areas. Concurrently, a section of the Hangzhou- Jinhua-Quzhou Expressway, which is not operated by the Group but runs parallel to the Hanghui Expressway, was reopened for traffic following construction, and certain sections of expressways running from Jiangxi to Hangzhou cancelled their truck height limits. As a result, a majority of long- distance trucks have returned to their original routes or chose alternative local roads, causing significant decreases in the truck traffic volume on the Hanghui Expressway, adversely impacting overall traffic volume on the section during the Period.

During the Period, the average daily traffic volume in full-trip equivalents along the Group's Shanghai- Hangzhou-Ningbo Expressway was 49,807, representing an increase of 6.8% year-on-year. In particular, the average daily traffic volume in full trip equivalents along the Shanghai-Hangzhou section of the Shanghai-Hangzhou-Ningbo Expressway was 48,987, representing an increase of 10.7% year-on-year, and that along the Hangzhou-Ningbo Section was 50,392, representing an increase of 4.9% year-on- year. Average daily traffic volume in full-trip equivalents along the Shangsan Expressway was 27,131, representing an increase of 8.2% year-on-year. Average daily traffic volume in full-trip equivalents along the Jinhua Section of the Ningbo-Jinhua Expressway was 17,661, representing a decrease of 1.1% year- on-year. Average daily traffic volume in full-trip equivalents along the Hanghui Expressway was 16,134, representing an increase of 4.2% year-on-year.

During the Period, total toll revenue from the 248km Shanghai-Hangzhou-Ningbo Expressway, the 142km Shangsan Expressway, the 70km Jinhua Section of the Ningbo-Jinhua Expressway and the 122km Hanghui Expressway was Rmb2,537.81 million, representing an increase of 6.6% year-on- year. Among which, toll revenue from the Shanghai-Hangzhou-Ningbo Expressway was Rmb1,620.28 million, representing an increase of 8.0% year-on-year; toll revenue from the Shangsan Expressway was Rmb537.80 million, representing an increase of 8.4% year-on-year; toll revenue from the Jinhua Section of the Ningbo-Jinhua Expressway was Rmb160.20 million, representing an increase of 0.2% year-on- year; and toll revenue from the Hanghui Expressway was Rmb219.53 million, representing a decrease of 0.2% year-on-year (on the same basis as last year).

Toll Road-Related Business Operations

The Company also operates certain toll road-related businesses along its expressways through its subsidiaries, including gas stations, restaurants and shops in service areas, as well as advertisements. Since May 2016, the Company has agreed to contract out the operation of several gas stations in its service areas to Zhejiang Expressway Petroleum Development Co., Ltd. For details, please refer to the Company's announcement "Continuing Connected Transactions in Relation to Contracting out Operation of Service Stations" dated May 27, 2016.

Zhejiang Province took action in 2014 to remove billboards from along sides of its expressways, which gradually narrowed most of the advertising business of the Group's subsidiary to expressway service areas. As a result, advertising income was substantially reduced within the Period. Additionally, during the Period, the overall income of the toll road-related business operations was adversely affected due to several reductions in the retail prices of domestics refined oil products. During the Period, revenue from toll road-related operations was Rmb532.11 million, representing a decrease of 43.2% year-on-year.

Securities Business

During the Period, due to weak domestic market sentiment, trading on domestic stock markets was lackluster. Trading volume on the Shanghai and Shenzhen stock markets decreased 52.9% year-on- year in total. Concurrently, there was a continued decline in average brokerage commission rate. As a result of these factors, during the Period, though income from Zheshang Securities' investment banking business experienced significant growth, other business segments of Zheshang Securities recorded varied levels of income decrease year-on-year.

During the Period, Zheshang Securities recorded total operating revenue of Rmb2,152.38 million, a decrease of 24.8% year-on-year. Of which, commission and fee revenue declined 30.5% year-on-year to Rmb1,407.45 million, and interest revenue from the securities business was Rmb744.93 million, representing a decrease of 10.9% year-on-year. Moreover, during the Period, securities investment gains of Zheshang Securities included in the condensed consolidated statement of profit or loss and other comprehensive income of the Group was Rmb107.99 million (corresponding period of 2015: gains of Rmb324.65 million).

Despite income from most of Zheshang Securities' businesses declining during the Period with the exception of its investment banking business, Zheshang Securities still outperformed the market in general. Zheshang Securities continued to develop all its businesses steadily, as its asset management business further expanded in scale while its investment banking business reported a new high in income amidst weak market sentiment. In addition, Zheshang Securities' IPO application to the Shanghai Stock Exchange was accepted by the China Securities Regulatory Commission in May, 2013, and it remains on the wait list for an IPO.

Other Business Operations

Other business income was mainly derived from hotel operations and sales of ancillary apartments, namely the Qiyu Apartments.

Grand New Century Hotel, owned by Zhejiang Yuhang Expressway Co., Ltd. (a 51% owned subsidiary of the Company), realized revenue of Rmb43.43 million for the Period.

Qiyu Apartments opened for sale on November 29, 2015. 151 flats were sold out during the Period and realized a sales revenue of Rmb71.40 million.

Long-Term Investments

Zhejiang Shaoxing Shengxin Expressway Co., Ltd. ("Shengxin Co", a 50% owned joint venture of the Company) operates the 73.4km Shaoxing Section of the Ningbo-Jinhua Expressway. During the Period, the average daily traffic volume in full-trip equivalents was 16,320, an increase of 13.7% year-on-year. Toll revenue during the Period was Rmb169.38 million. During the Period, the joint venture turned profitable for the first time and reported a net profit of Rmb0.20 million (corresponding period of 2015: net loss of Rmb30.47 million).

During the Period, Zhejiang Communications Investment Group Finance Co., Ltd. (a 35% owned associate company of the Company), derived income mainly from interest, fees and commissions for providing financial services, including arranging loans and receiving deposits, for the subsidiaries of Zhejiang Communications Investment Group Co., Ltd., the controlling shareholder of the Company. During the Period, this associate company realized a net profit of Rmb49.92 million (corresponding period of 2015: net profit of Rmb78.49 million).

Human Resources

During the Period, the Company actively revamped its human resource management, improved its remuneration and performance policy, and promoted the pegging of overall remuneration increase with the productivity of employees, thereby paving the way for increasing employees' remuneration. There was no significant change in other staff matters and assignment compared with the details disclosed in the Company's most recent annual report.

Financial Analysis

The Group adopts a prudent financial policy with an aim to provide shareholders of the Company with sound returns over the long term.

During the Period, profit attributable to owners of the Company was approximately Rmb1,368.21 million, representing a decrease of 8.5% over the corresponding period of 2015, return on owners' equity was 8.1%, representing a decrease of 4.7% over the corresponding period of 2015, while earnings per share for the Company was Rmb31.5 cents.

Liquidity and Financial Resources

As at June 30, 2016, current assets of the Group amounted to Rmb52,249.47 million in aggregate (December 31, 2015: Rmb54,359.48 million), of which bank balances and cash accounted for 7.3% (December 31, 2015: 9.7%), bank balances held on behalf of customers accounted for 42.9% (December 31, 2015: 49.8%), held for trading investments accounted for 13.5% (December 31, 2015: 6.9%) and loans to customers arising from margin financing business accounted for 14.7% (December 31, 2015: 19.4%). Current ratio (current assets over current liabilities) of the Group as at June 30, 2016 was 1.2 (December 31, 2015: 1.3). Excluding the effect of the customer deposits arising from the securities business, the resultant current ratio of the Group (current assets less bank balances held on behalf of customers over current liabilities less balance of accounts payable to customers arising from securities business) was 1.4 (December 31, 2015: 1.8).

As at As at
June 30, December 31,
2016 2015
Rmb'000 (Unaudited) Rmb'000 (Audited)
Cash and Cash equivalents
Rmb 3,498,769 4,935,103
US$ in Rmb equivalent 46,034 33,386
HK$ in Rmb equivalent 9,003 14,562
Time deposit - Rmb 275,000 270,000
Held for trading investments - Rmb 7,040,990 3,761,224
Available-for-sale investments - Rmb 1,213,642 1,032,750
Total 12,083,438 10,047,025
Rmb 12,028,401 9,999,077
US$ in Rmb equivalent 46,034 33,386
HK$ in Rmb equivalent 9,003 14,562

The amount of held for trading investments of the Group as at June 30, 2016 was Rmb7,040.99 million (December 31, 2015: Rmb3,761.22 million), of which 96.9% was invested in bonds, 3.0% was invested in stocks, and the rest was invested in open-end equity funds.

During the Period, net cash flow generated from the Group's operating activities amounted to Rmb1,804.42 million.

The Directors do not expect the Company to experience any problems with liquidity and financial resources in the foreseeable future.

Borrowings and Solvency

As at June 30, 2016, total liabilities of the Group amounted to Rmb49,042.35 million (December 31, 2015: Rmb51,893.11 million), of which 6.0% was bank and other borrowings, 2.0% was short- term financing note, 18.4% was bonds payable, 19.4% was financial assets sold under repurchase agreements, and 45.7% was accounts payable to customers arising from securities business.

As at June 30, 2016, total interest-bearing borrowings of the Group amounted to Rmb12,924.69 million, representing a decrease of 11.4% compared to that as at December 31, 2015. The borrowings comprised outstanding balances of domestic commercial bank loans of Rmb1,904.69 million, borrowings from other domestic financial institution of Rmb450.00 million, entrusted loans from Communications Group of Rmb570.00 million, short-term financing note of Rmb1.00 billion, beneficial certificates of Rmb1.30 billion, subordinated bonds of Rmb6.20 billion and corporate bonds of Rmb1.50 billion. Of the interest-bearing borrowings, 33.8% was not payable within one year.

Maturity Profile
>1 year-
Gross total Within 5 year Beyond
1 year inclusive 5 year
Rmb'000 Rmb'000 Rmb'000 Rmb'000
Floating rates
Domestic commercial bank loans 496,739 496,739 - -
Other domestic financial institution 450,000 450,000 - -
Fixed rates
Domestic commercial bank loans 1,407,951 1,407,951 - -
Entrusted loans from
Communications Group
570,000 - 570,000 -
Short-term financing note payable
- short-term financing note 1,000,000 1,000,000 - -
Bonds payable
- beneficial certificates 1,300,000 - 1,300,000 -
Bonds payable
- subordinated bonds 6,200,000 5,200,000 1,000,000 -
Bonds payable
- corporate bonds 1,500,000 - 1,500,000 -
Total as at June 30, 2016 12,924,690 8,554,690 4,370,000 -
Total as at December 31, 2015 14,584,051 5,394,051 8,860,000 330,000

As at June 30, 2016, the Group's loans from domestic commercial banks were short and long-term loans, of which long-term loans due in one year amounted to Rmb150.00 million, with floating interest rate ranging from 4.1325% to 4.9875% per annum. The floating interest rates for borrowings from other domestic financial institutions ranged from 4.275% to 4.5125% per annum. The annual interest rates for entrusted loans from Communications Group were fixed at 4.55%. The annual coupon rate for short-term loan note was fixed at 2.97%. The fixed annual interest rates of beneficial certificates ranged from 3.45% to 3.5% respectively. The fixed annual interest rates for subordinated bonds ranged from 5.7% to 6.3% respectively. The annual coupon rate for corporate bonds was fixed at 4.9%, while the annual interest rate for accounts payable to customers arising from the securities business was fixed at 0.35%.

Total interest expenses for the Period amounted to Rmb344.48 million, while profit before interest and tax amounted to Rmb2,617.72 million. The interest cover ratio (profit before interest and tax over interest expenses) stood at 7.6 (corresponding period of 2015 (Restated): 11.5) times.

As at June 30, 2016, the asset-liability ratio (total liabilities over total assets) of the Group was 68.8% (December 31, 2015: 70.2%). Excluding the effect of customer deposits arising from the securities business, the resultant asset-liability ratio (total liabilities less balance of accounts payable to customers arising from securities business over total assets less bank balances held on behalf of customers) of the Group was 54.5% (December 31, 2015: 53.2%).

Capital Structure

As at June 30, 2016, the Group had Rmb22,284.22 million in total equity, Rmb43,893.27 million in fixed-rate liabilities, Rmb946.74 million in floating-rate liabilities, and Rmb4,202.34 million in interest- free liabilities, representing 31.2%, 61.5%, 1.3% and 6.0% of the Group's total capital, respectively. The gearing ratio, which is computed by dividing the total liabilities less accounts payable to customers arising from the securities business by total equity, was 119.5% as at June 30, 2016 (December 31, 2015: 113.1%).

Capital Expenditure Commitments and Utilization

During the Period, capital expenditure of the Group totaled Rmb90.73 million. Amongst the total capital expenditure of the Group, Rmb15.27 million was incurred for acquisition and construction of properties, Rmb72.96 million was incurred for purchase and construction of equipments and facilities, and Rmb2.50 million was incurred for service area renovation and expansion.

As at June 30, 2016, the remaining capital expenditure committed by the Group totaled Rmb570.46 million. Amongst the remaining balance of total capital expenditures committed by the Group, Rmb302.36 million will be used for acquisition and construction of properties, Rmb239.26 million for acquisition and construction of equipment and facilities, Rmb28.84 million for service area renovation and expansion.

The Group will finance the above-mentioned capital expenditure commitments with internally generated cash flow first and then will comprehensively consider using debt financing and equity financing to meet any shortfalls.

Contingent Liabilities and Pledge of Assets

Pursuant to the board resolution of the Company dated November 16, 2012, the Company and Shaoxing Communications Investment Group Co., Ltd. (the other joint venture partner that holds 50% equity interest in Shengxin Co) provided Shengxin Co with a joint guarantee for its bank loans of Rmb2,200.00 million, in accordance with their proportionate equity interest in Shengxin Co. During the Period, Rmb60.00 million of the bank loans had been repaid and the remaining outstanding balance of the loans as at June 30, 2016 was Rmb1,980.00 million.

Except for the above, as at June 30, 2016, the Group did not have any other contingent liabilities, pledge of assets or guarantees.

Foreign Exchange Exposure

Save for (i) dividend payments to the holders of H shares in Hong Kong dollars, (ii) borrowing of HK$432,527,000 on June 8, 2016, and (iii) Zheshang International Financial Holding Co., Limited (a wholly owned subsidiary of Zheshang Securities) operating in Hong Kong, the Group's principal operations were transacted and denominated in Renminbi. During the Period, the Group purchased one-year Hong Kong dollar forwards of equivalent amount to hedge the foreign exchange risk derived from the Hong Kong dollar borrowing. Except for the above, during the Period the Group has not used any other financial instruments for hedging purpose. Therefore, the Group's exposure to exchange fluctuation is limited.

Although the Directors do not foresee any material foreign exchange risks for the Group, there is no assurance that foreign exchange risks will not affect the operating results of the Group in the future.

Outlook

As economic uncertainty has increased globally, downward pressure on China's economy is expected to continue. Under the "new normal", Zhejiang Province, a region with an above average growth outlook across China, will also face relatively more intense economic pressure. The Group expects that the Group's toll road business will maintain steady growth in 2016 given the macro and regional economic outlook, albeit with a slightly slower growth rate in organic traffic volume compared with 2015.

Currently, the business environment for the toll road industry is becoming increasingly complex. As more and more expressways within Zhejiang Province are launched for traffic, there will be a positive network effect but will also cause diversion impact. The Dongyang-Yongkang Expressway, which opened for traffic in July 2015, is expected to continue to have a slight diversion impact on traffic on the Jinhua Section of the Ningbo-Jinhua Expressway but the impact has been stabilized. The Group will endeavor to strengthen the monitoring and analysis of the transportation network as well as researching the traffic trends of the Group's expressways and the factors involved. The Group will adopt specific promotional and marketing measures to direct and attract more vehicles to use the expressways operated by the Group to minimize the diversion impact.

China's securities market is still in the process of deleveraging, but the Chinese government has released a series of measures to promote the healthy development of its capital market, a signal to show the government's confidence in the securities sector's sustainable development in the long term, which may bring new opportunities to the Group's securities business. At the same time, the Group will explore all potential avenues to accelerate Zheshang Securities' A-Share listing application on the Shanghai Stock Exchange. Moreover, Zheshang Securities will expand into innovative businesses and seek new profit drivers while strengthening its cost control and risk management.

Looking ahead into the second half of 2016, although China might still see continued downward economic pressure, the Company's management believes that the supply-side reform and various economic transformation measures initiated by Zhejiang Province will create a favorable development environment for all of the Group's businesses.

In July 2016, the Zhejiang Province government made a decision to merge Zhejiang Communications Investment Group Co., Ltd. ("Communications Group", the controlling shareholder of the Company) with Zhejiang Railway Investment Group Limited Co., Ltd. into a provincial communications investment and financing platform. This new business entity, which will continue to use the name of Communications Group, will be responsible for more construction assignments of transportation and infrastructure projects, thereby providing more opportunities in a wider scope for the Company to invest in and acquire quality transportation and infrastructure projects within the province.

In response to the dynamic change of internal and external environment, the Company's management will closely monitor the latest financial policy developments as well as evolving market trends to better formulate future strategic development plans. The Group will look to expand its core expressway business by investing in and acquiring quality toll road assets to further enhance its core competencies while strengthening its securities business and seeking suitable investments and development projects in order to enlarge the asset scale of its core businesses and increase future profitability.

Disclosure of Interests and Other Matters

PURCHASE, SALE AND REDEMPTION OF THE COMPANY'S SHARES

Neither the Company nor any of its subsidiaries has purchased, sold, redeemed or cancelled any of the Company's shares during the Period.

DISCLOSURE OF DIRECTORS', SUPERVISORS' AND CHIEF EXECUTIVE'S INTERESTS AND SHORT POSITIONS IN THE SHARES, UNDERLYING SHARES AND DEBENTURES

As at June 30, 2016, none of the Directors, supervisors and chief executives of the Company had any interest or short position in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part Xv of the Securities and Futures Ordinance (Cap 571 of the Laws of Hong Kong) (the "SFO")) as recorded in the register required to be kept pursuant to Section 352 of the SFO, or as otherwise notified to the Company and The Stock Exchange of Hong Kong Limited (the "Stock Exchange") pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") in Appendix 10 to the Rules Governing the Listing of Securities on the Stock Exchange (the "Listing Rules").

OTHER INTERESTS DISCLOSEABLE UNDER THE SFO

As at June 30, 2016, the following shareholders held 5% or more of the issued share capital of the Company according to the register of interests in shares required to be kept by the Company pursuant to Section 336 of the SFO:

Substantial shareholders Capacity Total interests
in number of
ordinary shares
of the Company
Percentage of
the issued
share capital
of the Company
(domestic shares)
Zhejiang Communications Investment Group Co., Ltd. Beneficial owner 2,909,260,000 100%
Substantial shareholders Capacity Total interests
in number of
ordinary shares
of the Company
Percentage of
the issued
share capital
of the Company
(H Shares)
JP Morgan Chase & Co. Beneficial owner,
investment manager and
custodian corporation/approved lending agent
169,442,626 (L)
1,326,000 (S)
66,804,479 (P)
11.81%
0.09%
4.65%
BlackRock, Inc. Interest of controlled corporation 130,897,684 (L) 9.13%
The Bank of New York Mellon Corporation Interest of controlled corporation 71,908,156 (L)
66,367,400 (P)
5.02%
4.63%

The letter "L" denotes a long position. The letter "S" denotes a short position. The letter "P" denotes interest in a lending pool.

Save as disclosed above, as at June 30, 2016, no person had registered an interest or short position in the shares or underlying shares of the Company that was required to be recorded pursuant to Section 336 of the SFO.

COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE AND THE MODEL CODE

During the Period, the Company had complied with all code provisions in the Corporate Governance Code and Corporate Governance Report (the "Code") set out in Appendix 14 to the Listing Rules, and had adopted the recommended best practices in the Code as and when applicable.

The Company has adopted a code of conduct regarding directors' securities transactions on terms no less exacting than the required standard set out in the Model Code. The Directors have confirmed their full compliance with the required standard set out in the Model Code and its code of conduct regarding directors' securities transactions during the Period.

RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE INTERIM REPORT AND ACCOUNTS

Each of the Directors of the Company, whose name and function are listed in the section headed "Corporate Information" of this report, confirms that, to the best of his/her knowledge:

- the condensed consolidated financial statements prepared in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants give a true and fair view of the assets, liabilities, financial position and performance of the Group and the undertakings included in the consolidation taken as a whole;

- the management discussion and analysis included in the interim report includes a fair review of the development and performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole during the Period, together with a description of the principal risks and uncertainties that the Group faces for the remaining six months of the financial year; and

- the interim report includes a fair review of the material related party transactions that have taken place during the Period and any material changes in the related party transactions described in the Company's annual report for the year ended 31 December 2015.

By order of the Board
Zhejiang Expressway Co., Ltd.
ZHAN Xiaozhang

Chairman

Hangzhou, the PRC, August 18, 2016

The electronic version of this report is published on the HKExnews website of the Hong Kong Exchanges and Clearing Limited (http://www.hkexnews.com.hk) and on the Company's website (www.zjec.com.cn).

Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the six months ended June 30,
Notes 2016
Rmb'000
(Unaudited)
2015
Rmb'000
(Unaudited
and restated)
Revenue 4 5,337,120 6,185,875
Operating costs (2,947,503) (3,555,595)
Gross profit 2,389,617 2,630,280
Securities investment gains 112,238 332,925
Other income 5 182,214 122,649
Administrative expenses (43,101) (48,125)
Other expenses (22,355) (44,777)
Share of (loss) profit of associates (992) 21,141
Share of profit (loss) of a joint venture 98 (15,234)
Finance costs 6 (344,479) (257,388)
Profit before tax 7 2,273,240 2,741,471
Income tax expense 8 (575,114) (705,540)
Profit for the Period 1,698,126 2,035,931
Other comprehensive (loss) income
Items that may be reclassified subsequently to profit or loss:
Available-for-sale financial assets
- Fair values gain during the Period 2,666 21,747
- Reclassification adjustments for cumulative gain included in profit or loss upon disposal (21,254) (410)
Exchange differences on translating foreign operations 90 (125)
Income tax relating to items that may be reclassified subsequently 4,647 (5,334)
Other comprehensive (loss) income for the Period, net of tax (13,851) 15,878
Total comprehensive income for the Period 1,684,275 2,051,809
Profit for the Period attributable to:
Owners of the Company 1,368,206 1,495,193
Non-controlling interests 329,920 540,738
1,698,126 2,035,931
Total comprehensive income for the Period attributable to:
Owners of the Company 1,360,985 1,503,315
Non-controlling interests 323,290 548,494
1,684,275 2,051,809
Earnings per share - Basic and diluted 10 Rmb31.50 cents Rmb34.43 cents

Condensed Consolidated Statement of Financial Position

Notes As at
June 30,
2016
Rmb'000
(Unaudited)
As at
December 31,
2015
Rmb'000
(Audited)
Non-current assets
Property, plant and equipment 3,113,077 3,178,494
Prepaid lease payments 56,776 57,745
Expressway operating rights 12,733,572 13,229,442
Goodwill 86,867 86,867
Other intangible assets 144,285 155,219
Interests in associates 644,444 583,537
Interest in a joint venture 275,698 275,600
Available-for-sale investments 1,682,378 1,635,858
Deferred tax assets 340,002 329,526
19,077,099 19,532,288
Current assets
Inventories 334,732 316,528
Trade receivables 11 191,901 151,083
Loans to customers arising from margin financing business 12 7,658,277 10,550,590
Other receivables and prepayments 13 1,588,591 1,231,799
Prepaid lease payments 1,939 1,939
Dividend receivable - 20,494
Derivative financial assets - 2,288
Available-for-sale investments 1,213,642 1,032,750
Held for trading investments 7,040,990 3,761,224
Financial assets held under resale agreements 14 7,987,561 4,959,155
Bank balances held on behalf of customers 22,403,032 27,078,574
Bank balances and cash
- Time deposits with original maturity over three months 275,000 270,000
- Cash and cash equivalents 3,553,806 4,983,051
52,249,471 54,359,475
Current liabilities
Placements from other financial institutions - 200,000
Accounts payable to customers arising from
securities business
22,402,799 27,009,641
Trade payables 15 746,710 908,616
Tax liabilities 345,222 641,606
Other taxes payable 79,206 88,022
Other payables and accruals 16 2,642,901 2,809,079
Dividends payable 123,848 333
Derivative financial liabilities 7,762 4,258
Bank and other borrowings 2,354,690 1,777,951
Short-term financing note payable 1,000,000 616,100
Bonds payable 5,200,000 3,000,000
Financial assets sold under repurchase agreements 17 9,512,523 5,385,380
44,415,661 42,440,986
Net current assets 7,833,810 11,918,489
Total assets less current liabilities 26,910,909 31,450,777
Non-current liabilities
Bank and other borrowings 570,000 1,590,000
Bonds payable 3,800,000 7,600,000
Deferred tax liabilities 256,692 262,128
4,626,692 9,452,128
22,284,217 21,998,649
Capital and reserves
Share capital 4,343,115 4,343,115
Reserves 12,538,456 12,393,543
Equity attributable to owners of the Company 16,881,571 16,736,658
Non-controlling interests 5,402,646 5,261,991
22,284,217 21,998,649

Condensed Consolidated Statement of Changes in Equity

Attributable to owners of the Company Non-
controlling
interests
Total
Share
capital
Share
premium
Statutory
reserve
Capital
reserve
Investment
revaluation
reserve
Foreign
currency
translation
reserve
Special
reserves
Dividend
reserve
Retained
profits
Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
At January 1, 2015 (Audited and restated) 4,343,115 3,645,726 3,907,055 1,712 28,403 - 1,599,088 1,150,925 2,324,873 17,000,897 4,127,573 21,128,470
Profit for the Period - - - - - - - - 1,495,193 1,495,193 540,738 2,035,931
Other comprehensive income for the Period - - - - 8,187 (65) - - - 8,122 7,756 15,878
Total comprehensive income for the Period - - - - 8,187 (65) - - 1,495,193 1,503,315 548,494 2,051,809
Dividend paid to non-controlling interests - - - - - - - - - - (106,008) (106,008)
Final dividend - - - - - - - (1,150,925) - (1,150,925) - (1,150,925)
Proposed interim dividend - - - - - - - 260,587 260,587 - - -
At June 30, 2015 (Unaudited and restated) 4,343,115 3,645,726 3,907,055 1,712 36,590 (65) 1,599,088 260,587 3,559,479 17,353,287 4,570,059 21,923,346
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
At January 1, 2016 (Audited) 4,343,115 3,355,621 4,505,773 1,712 56,332 191 18,666 1,216,072 3,239,176 16,736,658 5,261,991 21,998,649
Profit for the Period - - - - - - - - 1,368,206 1,368,206 329,920 1,698,126
Other comprehensive income for the Period - - - - (7,268) 47 - - - (7,221) (6,630) (13,851)
Total comprehensive income for the Period - - - - (7,268) 47 - - 1,368,206 1,360,985 323,290 1,684,275
Settlement of assets management product upon expiry - - - - - - - - - - (4,880) (4,880)
Dividend paid to non-controlling interests - - - - - - - - - - (150,111) (150,111)
Final dividend - - - - - - - (1,216,072) - (1,216,072) - (1,216,072)
Dividend for non-controlling interests - - - - - - - - - - (27,644) (27,644)
Proposed interim dividend - - - - - - - 260,587 (260,587) - - -
At June 30, 2016(Unaudited) 4,343,115 3,355,621 4,505,773 1,712 49,064 238 18,666 260,587 4,346,795 16,881,571 5,402,646 22,284,217

Condensed Consolidated Statement of Cash Flows

For the six months ended June 30,
2016
Rmb'000
(Unaudited)
2015
Rmb'000
(Unaudited
and restated)
Net cash from (used in) operating activities 1,804,419 (3,805,132)
Net cash used in investing activities (293,845) (228,296)
Net cash (used in) from financing activities (2,939,909) 8,630,214
Net (decrease) increase in cash and cash equivalents (1,429,335) 4,596,786
Cash and cash equivalents at beginning of the Period 4,983,051 3,356,563
Effect of exchange rate changes on the balance of cash and cash equivalents held in foreign currencies 90 (125)
Cash and cash equivalents at end of the Period 3,553,806 7,953,224

Notes to Condensed Consolidated Financial Statements

1.     BASIS OF PREPARATION

The condensed consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard 34 Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants (the "HKICPA") as well as with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules").

2.     MERGER ACCOUNTING RESTATEMENT

On August 5, 2015, the Company entered into a share transfer agreement with Zhejiang Communications Investment Group Co., Ltd. ("Communications Group") to acquire 80.614% equity interest in Zhejiang Hanghui Expressway Co., Ltd. ("Hanghui Co") from Communications Group for a cash consideration of Rmb1,699,348,000. Hanghui Co is principally engaged in the operation and management of the Hanghui Expressway, which is the Zhejiang section of Hangzhou-Ruili Expressway (G56) within the national expressway network. Before the above acquisition, Hanghui Co was 80.614% owned by Communications Group and 19.386% owned by non-controlling shareholders. The acquisition has been approved by independent shareholders on October 15, 2015 and subsequently completed on November 10, 2015. After the completion of the acquisition, Hanghui Co then became an 80.614% owned subsidiary of the Group and in December 2015, the equity interest held by the Group was increased to 88.674% after the Company made a capital contribution to Hanghui Co. Since Communications Group is the parent company of the Company, the Group's acquisition of the 80.614% equity interest from Communications Group was regarded as a business combination involving entities under common control and was accounted for using merger accounting method, in accordance with the guidance set out in Accounting Guideline 5 "Merger Accounting for Common Control Combinations" ("AG5") issued by the HKICPA.

As a result, the comparative condensed consolidated statement of profit or loss and other comprehensive income and condensed consolidated statement of cash flows for the six months ended June 30, 2015 have therefore been restated, in order to include the profit, assets and liabilities of the combining entities since the date on which they first come under common control.

The adoption of merger accounting method in respect of the Group's acquisition of 80.614% equity interest in Hanghui Co has resulted in a decrease in total comprehensive income attributable to owners of the Company, a decrease in profit attributable to owners of the Company and a decrease in earnings per share (basic and diluted) for the six months ended June 30, 2015 by Rmb19,255,000, Rmb19,255,000 and Rmb0.44 cents, respectively.

3.     PRINCIPAL ACCOUNTING POLICIES

The condensed consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at fair value, as appropriate.

In the Period, the Group has applied, for the first time, certain amendments to Hong Kong Financial Reporting Standards (the "HKFRSs") issued by HKICPA that are mandatorily effective for the Period. The application of the amendments to HKFRSs in the Period has had no material effect on the amounts reported in these condensed consolidated  financial statements and/or relevant disclosures set out in these condensed consolidated financial statements.

Except for the above, the accounting policies and methods of computation applied in the condensed consolidated financial statements for the Period are consistent with those followed in the preparation of the Group's annual financial statements for the year ended December 31, 2015.

4.     REVENUE AND SEGMENT INFORMATION

Compared to the same period last year, there were no major changes in the reportable and operating segments of the Group during the Period.

Segment revenue and results

The following is an analysis of the Group's revenue and results by reportable and operating segments:

For the six months ended June 30, 2016 (Unaudited)
Toll
operation
Rmb'000
Toll
related
operation
Rmb'000
Securities
operation
Rmb'000
Other
operation
Rmb'000
Total
segment
Rmb'000
Elimination
Rmb'000
Total
Rmb'000
Revenue
External sales 2,537,806 532,106 2,152,380 114,828 5,337,120 - 5,337,120
Inter-segment Sales - 283 - - 283 (283) -
Total 2,537,806 532,389 2,152,380 114,828 5,337,403 (283) 5,337,120
Segment profit 1,183,392 35,119 526,063 (46,448) 1,698,126 1,698,126
Revenue
External sales 2,379,853 936,885 2,861,871 7,266 6,185,875 - 6,185,875
Inter-segment sales - 11,255 - - 11,255 (11,255) -
Total 2,379,853 948,140 2,861,871 7,266 6,197,130 (11,255) 6,185,875
Segment profit 1,002,451 46,729 990,906 (4,155) 2,035,931 2,035,931

Segment profit represents the profit after tax of each operating segment. This is the measure reported to the chief operating decision maker - the Company's General Manager, for the purpose of resource allocation and performance assessment.

Revenue from major services

An analysis of the Group's revenue, net of discounts and taxes, for the Period is as followed:

For the six months ended June 30,
2016
Rmb'000
(Unaudited)
2015
Rmb'000
(Unaudited
and restated)
Toll operation revenue 2,537,806 2,379,853
Service area businesses revenue (mainly sales of goods) 521,277 886,397
Advertising business revenue 10,829 22,052
Toll road maintenance service revenue - 28,436
Commission and fee revenue from securities operation 1,407,455 2,026,162
Interest revenue from securities operation 744,925 835,709
Hotel and catering revenue 43,431 7,266
Property sales revenue 71,397 -
Total 5,337,120 6,185,875

5.           OTHER INCOME

For the six months ended June 30,
2016
Rmb'000
(Unaudited)
2015
Rmb'000
(Unaudited
and restated)
Interest income on bank balances and entrusted loan receivables 17,480 28,449
Rental income 77,776 50,056
Gain on commodity trading, net 22,747 3,722
Handling fee income 1,298 1,674
Towing income 3,958 4,228
Exchange loss, net (4,519) (9)
Others 63,474 34,529
Total 182,214 122,649

6.           FINANCE COSTS

For the six months ended June 30,
2016
Rmb'000
(Unaudited)
2015
Rmb'000
(Unaudited
and restated)
Interest expenses wholly repayable within 5 years:
Bank and other borrowings 70,660 96,509
Short-term financing note 8,723 42,609
Bonds payable 265,096 121,523
Total borrowing costs 344,479 260,641
Less: Amount capitalised in the cost of qualifying assets - (3,253)
344,479 257,388

7.           PROFIT BEFORE TAX

The Group's profit before tax has been arrived at after charging:

For the six months ended June 30,
2016 2015
Rmb'000
(Unaudited)
Rmb'000
(Unaudited
and restated)
Depreciation of property, plant and equipment 130,860 104,744
Release of prepaid lease payments 969 1,076
Amortisation of expressway operating rights
(included in operating costs) 495,870 495,931
Amortisation of other intangible assets (included in operating costs) 12,424 11,477
Cost of inventories recognised as an expense 450,892 794,047

8.           INCOME TAX EXPENSE

For the six months ended June 30,
2016
Rmb'000
(Unaudited)
2015
Rmb'000
(Unaudited
and restated)
Current tax:
PRC Enterprise Income Tax 586,379 713,166
Deferred tax (11,265) (7,626)
575,114 705,540

Under the Law of the PRC on Enterprise Income Tax (the "EIT Law") and Implementation Regulation of the EIT Law, the applicable tax rate of the Group is 25%.

Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profit. No Hong Kong Profits Tax has been provided as the Group has no estimated assessable profit during the Period.

9.     DIVIDENDS

The Directors have recommended the payment of an interim dividend of Rmb6 cents per share (corresponding period of 2015: Rmb6 cents per share), subject to shareholders' approval at the extraordinary general meeting of the Company.

10.   EARNINGS PER SHARE

The calculation of the basic earnings per share is based on profit for the Period attributable to owners of the Company of Rmb1,368,206,000 (corresponding period of 2015 (Restated): Rmb1,495,193,000) and the 4,343,114,500 (corresponding period of 2015: 4,343,114,500) ordinary shares in issue during the Period.

Diluted earnings per share presented is the same as basic earnings per share since there were no potential ordinary shares outstanding during both periods.

11.   TRADE RECEIVABLES

As at As at
June 30, December 31,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Audited)
Trade receivables comprise:
Fellow subsidiaries 4,330 10,331
Third parties 188,837 142,044
Total trade receivables 193,167 152,375
Less: Allowance for doubtful debts (1,266) (1,292)
191,901 151,083

The Group has no credit period granted to its trade customers of toll operation and service area businesses. The Group's trade receivable balance for toll operation is toll receivables from the Expressway Fee Settlement Centre of the Highway Administration Bureau of Zhejiang Province, which are normally settled within 3 months. All of these trade receivables were neither past due nor impaired in both periods.

In respect of the Group's asset management service operated by Zheshang Securities Co., Ltd ("Zheshang Securities", a 70.83% owned subsidiary of Zhejiang Shangsan Expressway Co., Ltd., which is a subsidiary of the Company), trading limits are set for customers. The Group seeks to maintain tight control over its outstanding accounts receivable in order to minimise credit risk. Overdue balances are regularly monitored by management.

The following is an aged analysis of trade receivables, net of allowance for doubtful debts presented based on the invoice date at the end of the reporting period, which approximated the respective revenue recognition dates:

As at As at
June 30, December 31,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Audited)
within 3 months 177,698 80,949
3 months to 1 year 11,577 64,493
1 to 2 years 1,881 4,679
Over 2 years 745 962
Total 191,901 151,083

12.   LOANS TO CUSTOMERS ARISING FROM MARGIN FINANCING BUSINESS

The Group has provided customers with margin financing and securities lending for securities transactions, the credit facility limits to margin clients are determined by the discounted market value of the pledged securities accepted by the Group.

All of the loans to margin clients which are secured by the underlying pledged securities are interest bearing. The Group maintains a list of approved stocks for margin lending at a specified loan to collateral ratio. Any excess in the lending ratio will trigger a margin call which the customers have to make good of the shortfall. The Group has the right to process forced liquidation if the customer fails to make good of the shortfall within a short period of time.

As at June 30, 2016, loans to customers under the margin financing and securities lending activities carried out in  the PRC were secured by the customers' stock securities and cash collaterals. The undiscounted market value of the stock security collaterals was amounted to Rmb26,330,291,000 (December 31, 2015: Rmb31,224,317,000). Cash collateral of Rmb1,731,319,000 (December 31, 2015: Rmb1,061,658,000) received from clients was included in accounts payable to customers arising from securities business.

No aged analysis is disclosed as in the opinion of the directors, the aged analysis does not give additional value in view of the nature of business of securities margining financing.

13.         OTHER RECEIVABLES AND PREPAYMENTS

As at As at
June 30, December 31,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Audited)
Entrusted loans and interest receivables from a related party (Note 18(ii) (2)) 603,703 634,436
Interest receivables 232,747 269,080
Prepayments 98,463 41,977
Bond and listed equity subscription deposit 366,421 176,377
Consideration receivable in relation to the disposal to
Communications Group of an associate and a subsidiary 9,083 44,759
Others (note) 278,174 65,170
1,588,591 1,231,799

Note:    Since several asset management products managed by Zhejiang Zheshang Securities Asset Management CO., Ltd (Zheshang Asset Management, a subsidiary of Zhejaing Securities) had undertaken liquidity risk of default, Zheshang Asset Management provided liquidity support of Rmb228,700,000. The collateral for the above issue is still under compulsory execution. As the value of the collateral could cover the obligatory right, no provision was provided.

14.         FINANCIAL ASSETS HELD UNDER RESALE AGREEMENT

As at As at
June 30, December 31,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Audited)
Analysed by collateral type:
Bonds 4,212,823 1,921,876
Stock securities 3,774,738 3,037,279
7,987,561 4,959,155
Analysed by market:
Inter-bank market 4,212,823 1,521,876
Shanghai/Shenzhen Stock Exchange 3,774,738 3,437,279
7,987,561 4,959,155

The collaterals include both equity and debt securities listed in the PRC. As at June 30, 2016, the fair value of equity and debt securities as collaterals was Rmb11,813,309,000 (December 31, 2015: Rmb6,394,246,000) and Rmb4,235,110,000 (December 31, 2015: Rmb1,947,197,000), respectively.

15.         TRADE PAYABLES

Trade payables mainly represent the construction payables for the maintenance projects of toll expressways. The following is an aged analysis of the trade payables presented based on the invoice date:

As at As at
June 30, December 31,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Audited)
within 3 months 245,456 422,424
3 months to 1 year 182,938 230,650
1 to 2 years 202,097 117,341
2 to 3 years 34,489 35,425
Over 3 years 81,730 102,776
Total 746,710 908,616

16.         OTHER PAYABLES AND ACCRUALS

As at As at
June 30, December 31,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Audited)
Other liabilities:
Accrued payroll and welfare 1,554,649 1,609,626
Advance from rental and advertising customers 72,214 62,151
Toll collected on behalf of other toll roads 8,717 2,758
 Retention payable 185,976 123,917
Deposit received for disposal of an associate 165,600 165,600
Deposits of equity return swaps 17,000 77,000
Payable to limited partnership in subsidiaries 166,141 133,088
Others 324,694 287,673
2,494,991 2,461,813
Other accruals 147,910 347,266
Total 2,642,901 2,809,079

17.         FINANCIAL ASSETS SOLD UNDER REPURCHASE AGREEMENTS

As at As at
June 30, December 31,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Audited)
Analysed as collateral type:
Bonds 9,312,523 3,485,380
Beneficial rights 200,000 1,900,000
9,512,523 5,385,380
Analysed by market:
Shanghai Stock Exchange 2,394,615 350,000
Inter-bank market 6,917,908 3,135,380
Other financial institutions 200,000 1,900,000
9,512,523 5,385,380

Sales and repurchase agreements are transactions in which the Group sells a security and simultaneously agrees to repurchase it (or an asset that is substantially the same) at a fixed price on a future date. Since the repurchase prices are fixed, the Group is still exposed to substantially all the credit risks and market risks and rewards of those securities sold. These securities are not derecognised from the financial statements but regarded as "collateral" for the liabilities because the Group retains substantially all the risks and rewards of these securities. In addition, the cash received is recognised as financial liability.

As at 30 June, 2016, the Group entered into repurchase agreements with certain counterparties. The proceeds from selling such securities are presented as financial assets sold under repurchase agreements. Because the Group sells the contractual rights to the cash flows of the securities, it does not have the ability to use the transferred securities during the term of the arrangement.

18.   RELATED PARTY TRANSACTIONS AND BALANCES

The following is a summary of the related party during the Period:

(i)     Transactions and balances with government related parties

The Group operates in an economic environment currently predominated by entities directly or indirectly owned or controlled by the PRC government ("government-related entities"). In addition, the Group itself is part of a larger group of companies under Communications Group which is controlled by the PRC government. However, due to the business nature, in respect of the Group's toll road business and securities business, the directors are of the opinion that it is impracticable to ascertain the identity of counterparties and accordingly whether the transactions are with other government-related entities in the PRC. Details of other significant transactions with government related parties are summarised below:

(a)   Communications Group

(1)       Entrusted loans

For the six months ended June 30,
2016 2015
Rmb'000 Rmb'000
 (Unaudited) (Unaudited
and restated)
Interest expenses incurred                13,112 15,057

Pursuant to the entrusted loan contracts entered into between Hanghui Co and Communications Group on March 12, 2013, Communications Group agreed to provide Hanghui Co with entrusted loans amounting to Rmb570,000,000 at a fixed interest rate of 5.24% per annum, which have been renewed for another three years on August 10, 2015, at a fixed interest rate of 4.55% per annum, with maturity date of August 10, 2018. Such amount was early repaid before the publication of this report.

(2)       Management and Administrative services

On July 1, 2015, the Company entered into agreements with the Communications Group, pursuant to which, the Company would provide management and administrative services to two toll roads of the Communications Group, including Shenjiahuhang Expressway and Shensuzhewan Expressway. According to the agreements, the Company would charge the Communications Group management fee based on actual cost basis. During the Period, a total management fee of Rmb235,000 has been recognized.

18.   RELATED PARTY TRANSACTIONS AND BALANCES (Continued)

(i)     Transactions and balances with government related parties (Continued)

(a)   Communications Group (Continued)

(3)       Maintenance services

On June 13, 2016, the Company entered into road maintenance agreements with Zhejiang Expressway Maitenance Co., Ltd ("Maintenance Co", a 100% owned subsidiary of Communications Group) pursuant to which, Maintenance Co would provide maintenance services for the four expressways of the Group. Such service began from May 1, 2016, and will be expired by November 30, 2016, with a term of seven months.

For the six months ended June 30,
2016 2015
Rmb'000 Rmb'000
 (Unaudited) (Unaudited
and restated)
Maintenance service expense 88,702 N/A

(4)         Other transactions

For the six months ended June 30,
2016 2015
Rmb'000 Rmb'000
 (Unaudited) (Unaudited
and restated)
Toll road service area leasing income earned(Note i) 4,523 4,550
Toll road service area management fee paid (Note i) 1,953 1,793
Property leasing income earned 794 807
Road maintenance service expense incurred(Note ii) 592 3,515

Note i:     Pursuant to the leasing and operation agreement entered into between Zhejiang Jinhua Yongjin Expressway Co., Ltd. ("Jinhua Co", a 100% owned subsidiary of the Company) and Zhejiang Communications Investment Group Industrial Development Co., Ltd. (Zhejiang Communications Investment, a fellow subsidiary of Communications Group), Jinhua Co leased the toll road service area to Zhejiang Communications Investment and Zhejiang Communications Investment managed the operation of the service area and the advertising business in respect of the toll road service area. Such business began from January 1, 2011, and will be expired at the same time with the operating right in 2030.

Pursuant to the leasing and operation agreements entered into between Hanghui Co and Zhejiang Communications Investment, Hanghui Co leased the toll road service area to Zhejiang Communications Investment and Zhejiang Communications Investment managed the operation of the service. Such business began from January 1, 2015 and will be expired at the same time with the operating right for respective expressway sections in 2029 to 2031.

Note ii:    Road maintenance service provided by other subsidiaries (except for Maintenance Co) of Communications Group

18.         RELATED PARTY TRANSACTIONS AND BALANCES (Continued)

(i)           Transactions and balances with government related parties (Continued)

(b)         Transactions with other government related parties

(1)         Zhejiang Expressway Petroleum Development Co., Ltd ("Petroleum Co")

For the six months ended June 30,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Unaudited)
Rental income from Petrol stations 10,212 N/A
Purchase of petroleum products 396,063 735,770

Pursuant to the operation management agreement entered into between Zhejiang Expressway Investment Development Co., Ltd. ("Development Company", a wholly owned subsidiary of the Company), and Petroleum Co in respect of the petrol stations in the service areas along Shanghai-Hangzhou-Ningbo and Shangsan Expressways. Petroleum Company assists Development Company in running their petrol stations along these roads. The agreement was renewed from May in 2016.

Pursuant to the lease agreements entered into between Development Company and Petroleum Company, Development Company contracted out the operating rights of petrol stations and the related buildings and equipment facilities at the service areas along Shanghai-Hangzhou-Ningbo and Shangsan Expressways to Petroleum Company, which run the petrol stations. The leasing term began upon the completion of change of business license of each petrol stations, and will be expired on December 31, 2018. Both parties could negotiate to continue the agreements after expiry of the lease. During the Period, Rmb10,212,000 from rental income of petrol stations was recognized.

Petroleum Company is a government related party of the Group.

(2)         Others

The Group has entered into various significant transactions, including deposit placements, borrowings and other general banking facilities, with certain banks and financial institutions which are government-related entities in its ordinary course of business. In view of the nature of those banking transactions, the directors are of the opinion that separate disclosure would not be meaningful.

18.   RELATED PARTY TRANSACTIONS AND BALANCES (Continued)

(ii)          Transactions and balances with associates and other non-government related parties

(1)         Loan advanced from Zhejiang Communications Investment Group Finance Co., Ltd. ("Zhejiang Communications Finance")

Zhejiang Communications Finance has advanced several loans to Hanghui Co. Amongst the loans, Rmb50,000,000 was a one-year term loan carried interest at a fixed annual interest rate of 5.1% and was repaid in June 2016 upon expiry. Rmb450,000,000 were long term loans with floating interest rate from 4.275% to 4.5125% respectively, among which Rmb330,000,000 was early repaid before the publication of this report.

As at As at
June 30, December 31,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Audited)
Outstanding loan payable balances:
within one year 100,000 250,000
 over one year 350,000 250,000
For the six months ended June 30,
2016 2015
Rmb'000 Rmb'000
 (Unaudited) (Unaudited
and restated)
Interest expenses incurred 11,137 11,188

18.         RELATED PARTY TRANSACTIONS AND BALANCES (Continued)

(ii)          Transactions and balances with associates and other non-government related parties (Continued)

(2)         Loans advanced to a subsidiary of Zhejiang Concord Property Investment Co., Ltd. ("Zhejiang Concord Property")

As at As at
June 30, December 31,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Audited)
Outstanding loan receivable balances 570,000 600,000
Interest receivables 33,703 34,436
603,703 634,436
Analysed for reporting purpose as:
Current assets 603,703 634,436
For the six months ended June 30,
2016 2015
Rmb'000 Rmb'000
 (Unaudited) (Unaudited
and restated)
Interest income earned                                                                                                           11,380 21,794

During the Period, the Group advanced additional entrusted loans totaling Rmb120,000,000 (corresponding period of 2015: Rmb500,000,000) and received settlement of loan principal and interests amounting to Rmb150,000,000 (corresponding period of 2015: Rmb400,000,000) and Rmb12,300,000 (corresponding period of 2015: Rmb11,304,000), respectively.

The entrusted loans were unsecured and repayable in accordance with the terms of entrusted loan agreements, carrying interests at an effective interest rate of 3.915% (2015: 8%) per annum. Such entrusted loans were guaranteed by world Trade Center Zhejiang Real Estate Development Co., Ltd., in full.

18.   RELATED PARTY TRANSACTIONS AND BALANCES (Continued)

(ii)          Transactions and balances with associates and other non-government related parties (Continued)

(3)   Financial service provided by Zhejiang Communications Finance

The Group has entered into a financial services agreement with Zhejiang Communications Finance. Pursuant to the agreement, Zhejiang Communications Finance agreed to provide the Group with deposit services, the loan and financial leasing services, the clearing services and other financial services.

As at As at
June 30, December 31,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Audited)
Bank balances and cash
- Time deposits with original maturity over three months 65,000 65,000
- Cash and cash equivalents 536,173 480,471
601,173 545,471
For the six months ended June 30,
2016 2015
Rmb'000 Rmb'000
 (Unaudited) (Unaudited
and restated)
Interest income earned                                                                                                               4,179 1,939

19.   FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS

This note provides information about how the Group determines fair value of various financial assets and financial liabilities.

Fair value measurements recognised in the condensed consolidated statement of financial position that are measured at fair value on a recurring basis

Some of the Group's financial assets and financial liabilities are measured at fair value at the end of each reporting period. The following table gives information about how the fair value of these financial assets and financial liabilities are determined (in particular, the valuation technique(s) and input(s) used).

19.         FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS (Continued)

Fair value as at Fair value
hierachy
Basis of fair value measurement/
valuation technique(s) and key input(s)
Significant
unobservable
input(s)
Relationship of
unobservable
inputs to fair value
Financial assets Classified as June 30,
2016
Rmb'000 (Unaudited)
December 31,
2015
Rmb'000 (Audited)
1) Equity investments
listed in exchange
Held for trading investments Assets- 212,144 Assets- 221,699 Level 1 Quoted bid prices in an active market N/A N/A
2) Equity securities listed
on exchange (inactive
due to low transaction
volume)
Available-for-sale investment Assets -303,366 Assets- 237,260 Level 2 Derived from recent transaction price N/A N/A
Available-for-sale investment Assets -272,043 Assets- 202,441 Level 3 Discounted cash flow. The fair value is
determined with reference to the quoted
market prices with an adjustment of
discount for lack of marketability.
Discounted
for lack of
marketability
The higher the
discount, the
lower the fair value
3) Listed Open-ended
equity funds
Held for trading investments Assets - 5,758 Assets- 191,967 Level 1 Quoted bid prices in an active market N/A N/A
4) Funds listed in
exchange
Available-for-sale investment Assets - 71,305 Assets- 55,982 Level 1 Quoted bid prices in an active market N/A N/A
5) Debt investments
listed in exchange or
in inter-bank market
Held for trading investments Assets -2,062,318 Assets- 1,170,952 Level 1 Quoted bid prices in an active market N/A N/A
Held for trading investments Assets -4,760,770 Assets- 2,176,606 Level 2 Discounted cash flow. Future cash flows
are estimated based on applying the
interest yield curves of different types of bonds as the key parameter.
N/A N/A
Available-for-sale investment Assets -50,000 Assets- 50,000 Level 2 Discounted cash flow. Future cash flows
are estimated based on applying the
interest yield curves of different
types of bonds as the key parameter.
N/A N/A
6) Investment in
structured products
Available-for-sale investment Assets -595,761 Assets -544,597 Level 2 Shares of the net assets of the products,
determined with reference to the net
asset value of the products, calculated
by observable (quoted) prices of
underlying investment portfolio and
adjustment of related expenses.
N/A N/A
Available-for-sale investment Assets - 183,142 Assets- 141,418 Level 3 Discounted cash flow. Future cash
flows are estimated based on applicable
yield of underlying investment portfolio
and adjustment of related expenses,
discounted at a rate that reflects
the credit risk of various counterparties
Actual yield of
the underlying
investment
portfolio and
the discount rate
The higher the
actual yield,
the higher
the fair value
7) Investment in
trust products
Available-for-sale investment Assets - 10,068 Assets- 10,000 Level 3 Discounted cash flow. Future cash
flows are estimated based on applicable
yield of underlying investment portfolio
and adjustment of related expenses,
discounted at a rate that reflects
the credit risk of various counterparties
Actual yield of
the underlying
investment
portfolio and
the discount rate
The higher the
actual yield,
 the higher
the fair value
8) Unlisted equity
investment at fair
value
Available-for-sale investment Assets-1,365,738 Assets- 1,382,313 Level 2 Calculated based on the fair value of
the underlying investments which are
listed equity securities, after making
adjustments of related expenses
N/A N/A

As at June 30,2016 (Unaudited)

Level 1
Rmb'000
Level 2
Rmb'000
Level 3
Rmb'000
Total
Rmb'000
Held for trading investments
- Equity securities -
 a. Manufacturing 138,298 - - 138,298
b. Finance service 43,944 - - 43,944
c. Information technology service 8,553 - - 8,553
d. Energy and water service 5,464 - - 5,464
e. Transportation, storage and postal service 5,107 - - 5,107
f. Real Estate 7,442 - - 7,442
g. wholesale 2,853 - - 2,853
h. Others 483 - - 483
212,144 - - 212,144
- Funds
- Bonds
5,758
2,062,318
-
4,760,770
 - 5,758
6,823,088
Sub-total 2,280,220 4,760,770 - 7,040,990
Available-for-sale investments
- Equity securities
a. Manufacturing - 148,754 - 148,754
b. Finance service - 8,960 - 8,960
c. Information technology service - 76,155 272,043 348,198
d. Transportation, storage and postal service - 4,528 - 4,528
e. Leasing and commercial service - 1,649 - 1,649
f. Culture, PE and entertainment - 21,935 - 21,935
g. wholesale - 19,917 - 19,917
h. Construction - 10,146 - 10,146
i. Others - 1,377,060 - 1,377,060
- 1,669,104 -272,043 1,941,147
- Funds 71,305 - - 71,305
- Bonds - 50,000 - 50,000
- Structured products - 595,761 183,142 778,903
- Trust products - - 10,068 10,068
Sub-total 71,305 2,314,865 465,253 2,851,423

As at December 31, 2015 (Audited)

Level 1 Level 2 Level 3 Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000
Held for trading investments
- Equity securities
a. Manufacturing 99,732 - - 99,732
b. Finance service 45,814 - - 45,814
c. Information technology service 21,284 - - 21,284
d. Transportation, storage and postal service 54,869 - - 54,869
221,699 - - 221,699
- Open-ended funds 191,967 - - 191,967
- Bonds 1,170,952 2,176,606 - 3,347,558
Sub-total 1,584,618 2,176,606 - 3,761,224
Available-for-sale investments
- Equity securities
a. Manufacturing - 104,309 - 104,309
b. Information technology service - 58,688 202,441 261,129
c. Finance service - 3,919 - 3,919
d. Transportation, storage and postal service - 2,305 - 2,305
e. Construction - 18,837 - 18,837
f. Energy service - 3,108 - 3,108
g. wholesale - 9,210 - 9,210
h. Agriculture, forestry, fishery and animal husbandry - 6,706 - 6,706
i. Others - 1,412,491 - 1,412,491
- 1,619,573 202,441 1,822,014
- Funds 55,982 - - 55,982
- Corporate bonds - 50,000 - 50,000
- Structured products - 544,597 141,418 686,015
- Trust products - - 10,000 10,000
Sub-total 55,982 2,214,170 353,859 2,624,011

There were no transfers between instruments in Level 1 and Level 2 in the current and prior period.

19.         FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS (Continued)

The following table represents the changes in Level 3 available-for-sale investments.

Structured
products
Trust
products
Restricted
Shares
Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000
As at January 1, 2015 251,191 89,515 - 340,706
Addition 20,080 20,000 200,000 240,080
Disposal (20,000) (93,000) - (113,000)
Total loss recognised in other comprehensive income (21,337) (6,515) 2,441 (25,411)
Transfer out of Level 3 (88,516) - - (88,516)
As at December 31, 2015 141,418 10,000 202,441 353,859
Addition 62,500 - - 62,500
Disposal (20,000) - - (20,000)
Total gain recognised in other comprehensive loss (776) 68 69,602 68,894
As at June 30, 2016 183,142 10,068 272,043 465,253

20.         SUMMARY OF FINANCIAL INFORMATION OF THE COMPANY

As at As at
June 30, December 31,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Audited)
Investments in subsidiaries 9,809,369 9,809,369
Amounts due from subsidiaries 1,212,907 314,649
Other assets 5,789,821 6,085,030
16,812,097 16,209,048
Total liabilities 4,016,028 2,955,256
Capital and reserves
Share capital 4,343,115 4,343,115
Reserves 8,452,954 8,910,677
12,796,069 13,253,792

21.         APPROVAL OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The condensed consolidated financial statements were approved and authorised for issue by the board of directors on August 18, 2016.

Corporate Information

EXECUTIVE DIRECTORS STATUTORY ADDRESS
ZHAN Xiaozhang (Chairman) 12/F, Block A, Dragon Century Plaza
CHENG Tao 1 Hangda Road
LUO Jianhu (General Manager) Hangzhou City, Zhejiang Province
PRC 310007
NON-EXECUTIVE DIRECTORS Tel : 86-571-8798 5588
Fax: 86-571-8798 5599
WANG Dongjie
DAI Benmeng
ZHOU Jianping PRINCIPAL PLACE OF BUSINESS
INDEPENDENT 5/F., No. 2, Mingzhu Int'l Business Center
NON-EXECUTIVE DIRECTORS 199 wuxing Road
Hangzhou City
ZHOU Jun Zhejiang Province
PEI Ker-wei PRC 310020
LEE wai Tsang, Rosa Tel : 86-571-8798 5588
Fax: 86-571-8798 5599
SUPERVISORS LEGAL ADVISERS
WU Yongmin (Resigned, with effect from As to Hong Kong and US law:
August 18, 2016) Herbert Smith Freehills
YAO Huiliang 23rd Floor, Gloucester Tower
SHI Ximin 15 Queen's Road Central
LU Xinghai Hong Kong
COMPANY SECRETARY As to English law:
Herbert Smith Freehills LLP
Tony ZHENG Exchange House
Primrose Street London EC2A 2HS United Kingdom
As to PRC law:
T & C Law Firm
AUTHORIZED REPRESENTATIVES 11/F, Block A, Dragon Century Plaza
1 Hangda Road
ZHAN Xiaozhang Hangzhou City, Zhejiang Province
LUO Jianhu PRC 310007
AUDITORS H SHARES LISTING INFORMATION
Deloitte Touche Tohmatsu The Stock Exchange of Hong Kong Limited
35/F, One Pacific Place Code: 0576
88 Queensway
Hong Kong LONDON STOCK EXCHANGE PLC
INVESTOR RELATIONS CONSULTANT Code: ZHEH
PR Concepts Asia Limited ADRS INFORMATION
16/F., Methodist House
36 Hennessy Road, wanchai US Exchange: OTC
Hong Kong Symbol: ZHEXY
Tel : 852-2117 0861 CUSIP: 98951A100
Fax: 852-2117 0869 ADR: H Shares 1:10
PRINCIPAL BANKERS REPRESENTATIVE OFFICE IN HONG KONG
Industrial and Commercial Bank of China, Suite 2910
Hangzhou Jiefang Road Subbranch 29/F, Bank of America Tower
12 Harcourt Road
Shanghai Pudong Development Bank, Hong Kong
Hangzhou Branch Tel : 852-2537 4295
Fax: 852-2537 4293
H SHARE REGISTRAR AND TRANSFER OFFICE
WEBSITE
Hong Kong Registrars Limited
Room 1712-1716, 17/F, Hopewell Centre www.zjec.com.cn
183 Queen's Road East
Hong Kong

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Note : To view the full set of the Company's 2016 Interim Report. Please visithttp://www.zjec.com.cn/
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