17th Jul 2007 10:18
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult a stockbroker or other registered dealer in securities, a bank manager, solicitor, professional accountant or other professional adviser.
If you have sold all your shares in Zhejiang Expressway Co., Ltd., you should at once pass this circular to the purchaser or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser.
The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.
Zhejiang Expressway Co., Ltd. (a joint stock limited company incorporated in the People's Republic of China with limited liability) (Stock Code: 0576) DISCLOSEABLE TRANSACTION FURTHER CAPITAL INJECTION INTO ZHESHANG SECURITIES 17 July, 2007 CONTENTS Definitions Letter from the Board
Appendix - General Information
DEFINITIONS
In this circular, unless the context otherwise requires, the following expressions have the following meanings:
"Agreement" the agreement dated 6 June 2007 between Shangsan Co and Zheshang Securities which governs the Further Capital Injection; "associate" has the same meaning given to it under the Listing Rules; "Company" Zhejiang Expressway Co., Ltd.; "CSRC" China Securities Regulatory Commission; "Development Co" Zhejiang Expressway Investment and Development Co., Ltd., a 51% owned subsidiary of the Company; "Directors" the directors of the Company; "Further Capital Injection" the contribution by Shangsan Co of an amount of RMB704,615,400 into the capital of Zheshang Securities pursuant to the Agreement; "Group" the Company and its subsidiaries; "HK$" Hong Kong dollars, the lawful currency of the Hong Kong Special Administrative Region; "Independent Third Party/ Independent third party/parties not connected withParties" the directors, supervisors, substantial shareholders of the Company or any of its subsidiaries or their respective associates; "Lanzhou Xinxing" Lanzhou Xinxing Heating Co., Ltd., a PRC incorporated limited liability company; "Latest Practicable Date" 13 July 2007, being the latest practicable date prior to the printing of this circular for ascertaining certain information for inclusion in this circular; "Lishui Hexin Investment" Lishui Hexin Investment Co., Ltd., a PRC incorporated limited liability company; "Listing Rules" the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited; "PRC" the People‚´s Republic of China; "RMB" renminbi, the lawful currency of the PRC; "Shanghai Shanghai National Telecommunications Co., Ltd., a Telecommunications" PRC incorporated limited liability company; "Shanghai Transportation" Shanghai Jiao Yun Co., Ltd., a PRC incorporated limited liability company; "Shangsan Co" Zhejiang Shangsan Expressway Co., Ltd., a PRC incorporated company and a subsidiary of the Company; "Shareholders" the shareholders of the Company; "Taizhou State-Owned" Taizhou State-owned Assets Operations Co., Ltd. , a company solely owned by the PRC Government; "Tonghe Investment" Tonghe Investment Holdings Co., Ltd., a PRC incorporated limited liability company; "Xizi United" Xizi United Holding Co., Ltd., a PRC incorporated limited liability company; "Yiwu Yuzhong Investment" Yiwu Yuzhong Investment Co., Ltd., a PRC incorporated limited liability company; "Zhejiang Hexin" Zhejiang Hexin Investment Management Co., Ltd., a PRC incorporated limited liability company; "Zhejiang Real Estate" Zhejiang Hexin Estate Co., Ltd., a PRC incorporated limited liability company; "Zhejiang Yulong" Zhejiang Yulong Industrial Co., Ltd., a PRC incorporated limited liability company; "Zhejiang Zhongyi" Zhejiang Zhongyi Group Co., Ltd., a PRC incorporated limited liability company; and "Zheshang Securities" Zheshang Securities Co., Ltd., a limited liability company incorporated in the PRC in May 2002. The Exchange rate used for reference purpose in this circular is HK$1.02 toRMB1.00. Letter From the Board Zhejiang Expressway Co., Ltd. (a joint stock limited company incorporated in the People's Republic of China with limited liability) (Stock Code: 0576) Board of directors: Registered address: 12/F, Block A, Executive directors: Dragon Century Plaza, GENG Xiaoping 1 Hangda Road, FANG Yunti Hangzhou, Zhejiang Province, ZHANG Jingzhong 310007, The People's Republic JIANG Wenyao of China Non-executive directors: ZHANG Luyun ZHANG Yang
Independent non-executive directors:
TUNG Chee Chen ZHANG Junsheng ZHANG Liping 17 July 2007 To the ShareholdersDear Sir and Madam, DISCLOSEABLE TRANSACTION FURTHER CAPITAL INJECTION INTO ZHESHANG SECURITIES
Introduction
It was announced by the Directors on 27 June 2007 that Shangsan Co, asubsidiary of the Company, entered into the Agreement with Zheshang Securitieson 6 June 2007 pursuant to which Shangsan Co injected a further amount ofcapital of RMB704,615,400 (approximately HK$718,707,700) into ZheshangSecurities by cash. Together with the initial injection of RMB600 million(approximately HK$612 million) into the capital of Zheshang Securities,Shangsan Co has contributed a total of approximately RMB1,305 million(approximately HK$1,331 million) into the capital of Zheshang Securities. TheFurther Capital Injection constitutes a discloseable transaction of the Companyunder the Listing Rules.Background On 6 June 2007, Shangsan Co, a subsidiary of the Company, entered into theAgreement with Zheshang Securities pursuant to which Shangsan Co injected afurther amount of capital of RMB704,615,400 (approximately HK$718,707,700) intoZheshang Securities by cash. Together with an initial injection of RMB600million (approximately HK$612 million) into the capital of Zheshang Securities,Shangsan Co has contributed a total of approximately RMB1,305 million(approximately HK$1,331 million) into the capital of Zheshang Securities. In conjunction with the offer by Zheshang Securities to Shangsan Co to injectadditional capital into Zheshang Securities, Zheshang Securities also invitedother of its shareholders to inject additional capital into Zheshang Securitiesin proportion to their respective equity interests in Zheshang Securities.Immediately before the acceptance of the offers by Shanghai Telecommunications,Shanghai Transportation and Zhejiang Real Estate (certain shareholders ofZheshang Securities at the relevant time), each of them transferred theirremaining shareholding in Zheshang Securities to certain third parties whichare PRC incorporated companies, details of which are set out in the table belowtitled "Change in shareholding of Zheshang Securities pursuant to the FurtherCapital Injection and Equity Interest Transfers". These successors togetherwith other shareholders of Zheshang Securities, namely Shangsan Co, TongheInvestment and Taizhou State-Owned have taken up the offers and injected therelevant amounts of capital into Zheshang Securities. After the Further Capital Injection by Shangsan Co and the pro-rata capitalcontribution by the other shareholders of Zheshang Securities, the registeredcapital of Zheshang Securities increased from RMB520 million to RMB1,520million and Shangsan Co continued to own as to 70.4615% of the capital ofZheshang Securities. The remaining 29.5385% of the capital of ZheshangSecurities was owned by other shareholders, which, to the best of the Directors‚´ knowledge, information and belief and after having made all reasonableenquiry, are all Independent Third Parties.
Change in shareholding of Zheshang Securities pursuant to the Further Capital Injection and equity interest transfers
Details of shareholding percentage of Zheshang Securities immediately beforeand after the Further Capital Injection and equity interest transfers are asfollows:Name of the equity holders Percentage of Percentage of holding in the holding in the equity capital equity capital immediately prior immediately to the Further after the Capital Injection Further Capital and equity Injection and interest equity interest transfers transfers Shangsan Co 70.4615% 70.4615%Tonghe Investment 4% 4%Taizhou State-Owned 4% 4%Shanghai Telecommunications 10% -Shanghai Transportation 7.6924% -Zhejiang Real Estate 3.8461% -Yiwu Yuzhong Investment - 4.8%Zhejiang Zhongyi - 2%Lishui Hexin Investment - 3.2%Xizi United - 3.8462%Lanzhou Xinxing - 3.8462%Zhejiang Yulong - 2.6923%Zhejiang Hexin - 1.1538% ¯¼¯¼¯¼¯¼¯¼¯¼¯¼ ¯¼¯¼¯¼¯¼¯¼¯¼¯¼ 100% 100% ============= =============Notes:
(1) Shanghai Telecommunications, before taking up the offer by Zheshang
Securities, transferred its remaining 10% equity interest in Zheshang
Securities to Yiwu Yuzhong Investment (4.8%), Zhejiang Zhongyi (2%) and Lishui
Hexin Investment (3.2%) respectively.
(2) Shanghai Transportation, before taking up the offer by Zheshang Securities,
transferred its remaining 7.6924% equity interest in Zheshang Securities to
Xizi United and Lanzhou Xinxing respectively in equal share.
(3) Zhejiang Real Estate, before taking up the offer by Zheshang Securities,
transferred its remaining 3.8461% equity interest in Zheshang Securities to
Zhejiang Yulong (2.6923%) and Zhejiang Hexin (1.1538%) respectively.
Funding
The Further Capital Injection was partially funded by internal resources ofShangsan Co and internal financing arrangements of the Group. Details ofarrangements of the internal financing arrangements of the Group were set outin an announcement of the Company dated 30 May 2007.
Effective Date of Further Capital Injection
The Further Capital Injection will be effective as and when approval thereof is obtained from the CSRC. As at the Latest Practicable Date, approval has not been obtained from the CSRC.
Impact of the Further Capital Injection
Pending approval of the Further Capital Injection, Shangsan Co has contributedan aggregate amount of approximately RMB1,305 million (approximately HK$1,331million) into the capital of Zheshang Securities. This corresponds to 70.4615%of the equity interests in Zheshang Securities. The Company currently has a73.625% shareholding in Shangsan Co, and therefore has an indirect interest of51.877% in Zheshang Securities. As Zheshang Securities is a subsidiary of Shangsan Co., which in turn is asubsidiary of the Company, the Further Capital Injection will increase theassets of the Group, but will not have a material impact on the earnings andliabilities of the Group.
Based on the audited accounts of Zheshang Securities, the net assets of Zheshang Securities amounted to approximately negative RMB188 million (approximately negative HK$191 million) and approximately RMB779 million (approximately HK$795 million) as at 31 December 2005 and 2006 respectively.
The audited profits after taxation and extraordinary items of Zheshang Securities amounted to approximately negative RMB719 million (approximately negative HK$733 million) for the year ended 31 December 2005. The audited profits after taxation of Zheshang Securities amounted to approximately RMB203 million (approximately HK$207 million) for the year ended 31 December 2006.
Note: The accounts of Zheshang Securities for the year ended 31 December 2005
were prepared in accordance with accounting standards commonly accepted in the
PRC, whilst those for the year ended 31 December 2006 were prepared in
accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong
Institute of Certified Public Accountants.
Reasons of the Transaction
The Further Capital Injection will increase the net capital of ZheshangSecurities and, the Directors believe will set out a more solid foundation forits involvement in more advanced trading activities, including but not limitedto the trading in share index futures.
By expanding the scope of business of Zheshang Securities, Zheshang Securities will become more competitive in the capital market of the PRC.
Views of the Directors
The Directors (including the independent non-executive Directors), havingregard to the background of the Further Capital Injection as described above,believe that the terms of the Agreement, which were determined after arm'slength negotiations, are fair and reasonable and in the interests of theCompany and the shareholders of the Company as a whole. The Further Capital Injection contemplated under the Agreement constitutes adiscloseable transaction of the Company under the Listing Rules and is requiredto be disclosed by way of the Company's announcement dated 27 June 2007 andthis circular.
Information of the Group, Shangsan Co and Zheshang Securities
The Company was incorporated on 1 March 1997 in the PRC and is a joint stocklimited company with a registered share capital of RMB4,343,114,500(approximately HK$4,429,976,790) at present. The main business of the Group isinvestment in, development, operation, management, and collection of tolls, ofthe Shanghai-Hangzhou-Ningbo Expressway and the Shangsan Expressway, both inthe Zhejiang Province of the PRC, and businesses ancillary to the operation ofthe expressways, such as billboard advertising and operation of service areason the expressways. Apart from the 70.4615% shareholding interest in Zheshang Securities, ShangsanCo owns and operates the Group‚´s business relating to collection of road tollsin respect of the Shangsan Expressway.
Zheshang Securities is engaged in securities trading business, underwriting of securities offering, investment advisory and other related activities as authorized by the CSRC from time to time.
Additional Information
Your attention is drawn to the information set out in the Appendix to thiscircular. Yours faithfully, By Order of the Board ZHANG Jingzhong Company Secretary APPENDIX - GENERAL IMFORMATION
1. Responsibility statement
This circular includes particulars given in compliance with the Listing Rulesfor the purpose of giving information with regard to the Company. The Directorscollectively and individually accept full responsibility for the accuracy ofthe information contained in this circular and confirm, having made allreasonable enquires, that to the best of their knowledge and belief there areno other facts the omission of which would make any statement hereinmisleading.
2. Directors' interests in securities
As at the Latest Practicable Date, the interests and short positions of theDirectors, Supervisors, and the chief executive in the shares, underlyingshares and debentures of the Company or any associated corporations (within themeaning of the SFO) which were required to be notified to the Company and theStock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (includinginterests and short positions which they have taken on were deemed to haveunder such provisions of the SFO), or which were required, pursuant to section352 of the SFO, to be entered in the register referred to therein, or whichwere required to be notified to the Company and the Stock Exchange pursuant tothe Model Code for Securities Transactions by Directors of Listed Companieswere as follows:Name Position Contribution Nature of
Percentage of interest of registered registered capital of capital in Development Development Co Co (RMB) Mr. Geng Xiaoping Chairman 2,400,000 beneficially owned(1) 3.00% Mr. Fang Yunti Director/Chief 1,920,000 beneficially owned(2) 2.40% executive Mr. Jiang Wenyao Director 1,320,000 beneficially owned(3) 1.65% Mr. Zhang Director 1,100,000 beneficially owned(4) 1.38% Jingzhong Mr. Fang Zhexing Supervisor 700,000 beneficially owned(5) 0.88% Notes:
(1) These interests in the registered capital of Development Co are held by Ms.
Huang Qiuxia as trustee for and on behalf of Mr. Geng Xiaoping pursuant to a
trust agreement dated 26th May, 2003.
(2) These interests in the registered capital of Development Co are held by Ms.
Huang Qiuxia as trustee for and on behalf of Mr. Fang Yunti pursuant to a trust
agreement dated 26th May, 2003.
(3) These interests in the registered capital of Development Co are held by Ms.
Huang Qiuxia as trustee for and on behalf of Mr. Jiang Wenyao pursuant to a
trust agreement dated 17th April, 2006.
(4) These interests in the registered capital of Development Co are held by Ms.
Huang Qiuxia as trustee for and on behalf of Mr. Zhang Jingzhong pursuant to a
trust agreement dated 14th September, 2005.
(5) These interests in the registered capital of Development Co are held by Ms.
Huang Qiuxia as trustee for and on behalf of Mr. Fang Zhexing pursuant to a
trust agreement dated 26th May, 2003.
Save as disclosed above, as at the Latest Practicable Date, none of theDirectors, the Supervisors and the chief executive and their respectiveassociates had any interests or short positions in the shares, underlyingshares and debentures of the Company or any associated corporations (within themeaning of the SFO) which were required to be notified to the Company and theStock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (includinginterests and short positions which they have taken on were deemed to haveunder such provisions of the SFO), or which were required, pursuant to section352 of the SFO, to be entered in the register referred to therein, or whichwere required to be notified to the Company and the Stock Exchange pursuant tothe Model Code for Securities Transactions by Directors of Listed Companies.
3. Substantial shareholders' interests in securities
As at the Latest Practicable Date, according to the register kept by theCompany pursuant to section 336 of the SFO and so far as the Directors wereaware, the following persons (not being a Director, Supervisor or chiefexecutive of the Company) had an interest or short position in the shares andunderlying shares of the Company which would fall to be disclosed to theCompany under the provisions of Divisions 2 and 3 of Part XV of the SFO or whowas, directly or indirectly, interested in 10% or more of the nominal value ofany class of share capital carrying rights to vote in all circumstances atgeneral meetings of any member of the Group together with the number of sharesin which they were deemed to be interested:Name Capacity Number of Percentage shares held of share capital (domestic shares) Zhejiang Communications Investment Beneficial 2,432,500,000 83.61%Group Co., Ltd. owner Huajian Transportation Economic Beneficial 476,760,000 16.39%Development Center owner Name Capacity Number of Percentage shares held of share capital (H shares) Baillie Gifford & Co. Investment 214,093,200 14.93% manager/ (long interest of position) controlled corporations Aberdeen Asset Management Plc and its Investment 185,290,170 12.92%associates manager (long position) J.P. Morgan Chase & Co. Custodian 100,430,007 7.00% corporation/ (long 6.68% approved position) lending agent/ 95,789,100 investment (lending manager/ pool) beneficial owner Mondrian Investment Partners Ltd. Investment 83,819,000 5.85% manager (long position) The Bank of New York Mellon Corporation Interest of 78,465,160 5.47% 2.58% controlled (long corporations position) 36,945,560 (lending pool) Save as disclosed above, as at the Latest Practicable Date, there was no otherperson (other than the interests of the Director, Supervisor or chief executiveof the Company), who had an interest or short position in the shares andunderlying shares and debentures of the Company which would fall to bedisclosed to the Company under the provisions of Division 2 and 3 of Part XV ofthe SFO or who was, directly or indirectly, interested in 10% or more of thenominal value of any class of share capital carrying rights to vote in allcircumstances at general meetings of any member of the Group.
4. Interest of Directors in substantial shareholders
Mr. Geng Xiaoping, an executive Director, is a director and general manager ofZhejiang Communications Investment Group Co., Ltd. Ms. Zhang Luyun, anon-executive Director, is a director and a deputy general manager of ZhejiangCommunications Investment Group Co., Ltd. Ms. Zhang Yang, a non-executiveDirector, is a deputy general manager of Huajian Transportation EconomicDevelopment Center.
5. Service contracts
As at the Latest Practicable Date, none of the Directors nor Supervisors has aservice contract with any member of the Group which is not determinable withinone year without payment of compensation (other than statutory compensation).
6. Interests in competing businesses
As at the Latest Practicable Date, none of the Directors or Supervisors (andtheir respective associates) has any interest, and as far as each Director isaware none of his associates has any interests, in any business which competesor is likely to compete, either directly or indirectly, with the existingbusiness of the Group.
7. Litigation
So far as the Directors were aware, as at the Latest Practicable Date, nolitigation or claims of material importance are pending or threatened againstany member of the Group.8. General
(a) The Secretary of the Company is Mr. Zhang Jingzhong, a PRC qualified
lawyer.
(b) As at the date hereof, the Company has not appointed any qualified
accountant as required under the Listing Rules. As announced on 20th January,
2006, the Company has obtained a conditional waiver in relation to compliance
with Rule 3.24 of the Listing Rules.
(c) The registered office of the Company is situated at 12/F, Block A, Dragon
Century Plaza, 1 Hangda Road, Hangzhou, Zhejiang, the PRC. The branch share
registrar of the Company in Hong Kong is Hong Kong Registrars Limited at Rooms
1806-1807,18/F, Hopewell Centre, 183 Queen's Road East, Hong Kong.
(d) The English language text of this document shall prevail over the Chinese
language text.
ZHEJIANG EXPRESSWAY CO LDRelated Shares:
ZHEH.L