Zhejiang Expressway Co Ld - Connected Transaction

As the applicable percentage ratios in respect of the transaction contemplated under the Independent Financial Adviser Agreement are more than 0.1% but less than 5%, the Independent Financial Adviser Agreement is subject to the reporting, announcement and annual review requirements but exempt from the independent Shareholders' approval requirement under Chapter 14A of the Listing Rules.

Information with respect to the Independent Financial Adviser Agreement will be disclosed in the Company's annual report for the year ended December 31, 2017.

THE INDEPENDENT FINANCIAL ADVISER AGREEMENT

On May 12, 2017, Zheshang Securities, an indirect non wholly-owned subsidiary of the Company, entered into the Independent Financial Adviser Agreement with Zhejiang Communications Technology (formerly known as Jiangshan Chemical), a non wholly-owned subsidiary of the controlling shareholder of the Company, and Dongxing Securities, an independent third party, pursuant to which Zhejiang Communications Technology agreed to appoint Zheshang Securities and Dongxing Securities, as joint independent financial advisers, to provide financial advisory services with respect to its Substantial Assets Transaction.

Principal terms of the Independent Financial Adviser Agreement are set out below:

Due to the inadvertence of the management, the Independent Financial Adviser Agreement was discovered only during the annual review process of the connected transactions entered into for the financial year ended 2017. As the applicable percentage ratios in respect of the transaction contemplated under the Independent Financial Adviser Agreement are more than 0.1% but less than 5%, thus, such transaction is subject to the reporting, annual review and announcement requirements, but exempt from independent shareholders' approval requirements.

Failure to disclose this transaction constitutes a breach of the Listing Rules. The Company will take steps to strengthen its internal control measures to monitor connected transactions going forward, in order to avoid repeating similar breach. In this regard, the Company will review the internal communication and reporting system and practice with the relevant departments and staff, particularly over the reporting of potential connected transactions.

REASONS FOR AND BENEFITS OF THE TRANSACTIONS

Financial advisory services is one of the major business of Zheshang Securities. The income generated from financial advisory services accounted for a significant proportion of Zheshang Securities' total revenue in the past few years. By entering into the Independent Financial Adviser Agreement, Zheshang Securities was able to earn the advisory fees and participate in a transaction which had significant influence in the PRC capital market, thus strengthening its position as a leader in the financial services market in Zhejiang.

Given the above, the Directors (including the independent non-executive Directors) are of the view that the terms of the Independent Financial Adviser Agreement are on normal commercial terms, in the ordinary and usual course of business of the Company and are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

LISTING RULES IMPLICATIONS

As at the date of this announcement, Communications Group is a controlling shareholder of the Company. Zhejiang Communications Technology is a non wholly-owned subsidiary of Communications Group. Therefore, Zhejiang Communications Technology is a connected person of the Company and as a result, the transaction under the Independent Financial Adviser Agreement constitute connected transactions for the Company under Chapter 14A of the Listing Rules.

As the applicable percentage ratios in respect of the transaction contemplated under the Independent Financial Adviser Agreement are more than 0.1% but less than 5%, the Independent Financial Adviser Agreement is subject to the reporting, announcement and annual review requirements but exempt from the independent Shareholders' approval requirement under Chapter 14A of the Listing Rules.

Information with respect to the Independent Financial Adviser Agreement will be disclosed in the Company's annual report for the year ended December 31, 2017.

None of the Directors have a material interest in the transaction contemplated under the Independent Financial Adviser Agreement and none are required to abstain from voting on the relevant Board resolutions.

INFORMATION ON THE PARTIES

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 securities brokerage, investment banking, asset management, margin financing and securities lending through Zheshang Securities.

Zheshang Securities is a joint stock company established under the laws of the PRC with limited liability on 9 May 2002, the shares of which are listed on the Shanghai Stock Exchange (stock code: 601878). As at the date of this announcement, Zheshang Securities is owned as to 46.93% by the Company indirectly. Zheshang Securities is principally engaged in the provision of securities broking services, margin financing and securities lending services, securities underwriting and sponsorship services, asset management, advisory services and proprietary trading.

Zhejiang Communications Technology is a joint stock company established under the laws of the PRC with limited liability on 23 November 1998, the shares of which are listed on the Shenzhen Stock Exchange (stock code: 002061). As at the date of this announcement, Zhejiang Communications Technology is owned as to 60.24% by Communications Group directly, and therefore Zhejiang Communications Technology is an associate of the Company. Zhejiang Communications Technology is principally engaged in production, development and sales of chemical products as well as engineering construction services.

DEFINITIONS

In this announcement, unless the context specifies otherwise, the following defined expressions have the following meanings:

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

Hangzhou, the PRC, March 16, 2018

As at the date of this announcement, the executive directors of the Company are: Mr. ZHAN Xiaozhang, Mr. CHENG Tao and Ms. LUO Jianhu; the non-executive directors of the Company are: Mr. WANG Dongjie and Mr. DAI Benmeng; and the independent non-executive directors of the Company are: Mr. ZHOU Jun, Mr. PEI Ker-Wei and Ms. LEE Wai Tsang, Rosa.