Connected Transaction

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong KongLimited take no responsibility for the contents of this announcement, make norepresentation as to its accuracy or completeness and expressly disclaim anyliability whatsoever for any loss howsoever arising from or in reliance upon thewhole or any part of the contents of this announcement. Zhejiang Expressway Co., Ltd (A joint stock limited company incorporated in the People's Republic of China with limited liability) (Stockcode:0576) CONNECTED TRANSACTION ACQUISITION OF PROPERTIES ACQUISITION OF PROPERTIES The Company announces that the Company and the Vendor have entered intothe Commercial Property SPAs and the Car Park Spaces Transfer Agreement on26 September 2014 under which the Company will acquire the Office Unitsand the Car Park Spaces for an aggregate cash consideration ofRMB202,977,014 (equivalent to approximately HK$257,780,808). LISTING RULES IMPLICATIONS As at the date of this announcement, the Communications Group beneficially owns2,909,260,000 Domestic Shares, representing approximately 67% of the issuedshare capital of the Company. By virtue of this shareholding interest,Communications Group is a substantial Shareholder (as defined under the ListingRules) and the Vendor, which is a wholly-owned subsidiary of CommunicationsGroup, is accordingly a connected person of the Company. The transactionscontemplated under the Agreements therefore constitute connected transactionsfor the Company under the Listing Rules. As each of the applicable percentage ratios in respect of the Acquisitions (inaggregate) is more than 0.1% but less than 5%, the Acquisitions are subject tothe reporting and announcement requirements but are exempt from the independentshareholders' approval requirement under Chapter 14A of the Listing Rules. ACQUISITION OF PROPERTIES The Company announces that the Company and the Vendor have entered into theCommercial Property SPAs and the Car Park Spaces Transfer Agreement on 26September 2014 under which the Company will acquire the Office Units and theCar Park Spaces for an aggregate cash consideration of RMB202,977,014(equivalent to approximately HK$257,780,808). The Company and the Vendor have entered into a Commercial Property SPA inrespect of each Office Unit, because the property ownership certificate foreach Office Unit will be applied for individually. Each of the CommercialProperty SPAs has the same principal terms (other than the relevant provisionstherein in relation to the unit to be acquired and the amount of considerationpayable). The principal terms of the Commercial Property SPAs and the Car Park SpacesTransfer Agreement are as follows: Commercial Property SPAs Date26 September 2014 Parties (i) the Company (as purchaser)(ii) the Vendor (as seller) Properties to be acquired The Vendor has agreed to sell, and the Company has agreed to purchase, all theOffice Units, being levels 4 to 7 of the office building No. 2 of MingzhuInternational Business Center located at Qianjiang New Town Lot Hang Zheng ChuChu (2004) 43 A-C9, Jianggan District, Hangzhou, Zhejiang Province, the PRC.The Office Units were built by the Vendor and have an aggregate gross floorarea of 5,980.44 square metres. Consideration and payment terms The total consideration for the Office Units is RMB190,477,014 (equivalent toapproximately HK$241,905,808). RMB180,953,163.3 (equivalent to approximatelyHK$229,810,518), representing 95% of the total consideration payable by theCompany under the Commercial Property SPAs (the "First Payment"), will becomepayable within 7 days after the Commercial Property SPAs are signed and theVendor delivers formal invoices in relation to the Office Units in accordancewith the Commercial Property SPAs. The remaining RMB9,523,850.7 (equivalent toapproximately HK$12,095,290), representing 5% of the said total consideration,will become payable within 7 days after the Company has obtained all the requiredtitle documents to the Office Units. If the Company fails to pay any part of consideration for any Office Unit for aperiod of no more than 60 days after the date when it becomes payable, theCompany shall pay compensation to the Vendor, in a sum to be calculated at therate of 0.01% per day until such consideration is paid in full. If the Company failsto pay any part of consideration for any Office Unit for more than 60 daysafter the date when it becomes payable, the Vendor will be entitled to elect whetheror not to terminate the relevant Commercial Property SPA. If the Vendor elects toterminate the relevant Commercial Property SPA, the Company shall paycompensation to the Vendor, in a sum to be calculated at the rate of 2% of therelevant part of consideration payable. If the Vendor elects not to terminatethe relevant Commercial Property SPA, it will continue in force and the Companyshall pay compensation to the Vendor, in a sum to be calculated at the rate of0.02% per day until such consideration is paid in full. The consideration for the Office Units is to be satisfied by the Company incash and will be financed from the internal resources of the Group. The consideration for the Office Units was determined after arm's lengthnegotiation between the Company and the Vendor, based on normal commercialterms and by reference to the Valuation Report prepared by DTZ, an independentproperty valuer, in respect of the Properties. According to the ValuationReport, the market value of the Office Units as at 1 August 2014 was estimatedto be RMB192,300,000 (equivalent to approximately HK$244,221,000). Delivery of the Office Units If the Company pays the First Payment before 30 September 2014, the Vendorshall complete the inspection and deliver the Office Units to the Company by 30September 2014. If the Company has not paid the First Payment by 30 September 2014,the Vendor shall deliver the Office Units within 5 business days after the Companyhas paid the First Payment in full. If the Vendor fails to deliver any of the Office Units for a period of no morethan 60 days, the Vendor shall pay compensation to the Company, in a sum to becalculated at the rate of 0.01% per day until the relevant Office Unit isdelivered. If the Vendor fails to deliver any of the Office Units for more than60 days, the Company will be entitled to elect whether or not to terminate therelevant Commercial Property SPA. If the Company elects to terminate therelevant Commercial Property SPA, the Vendor shall return the relevantconsideration already paid by the Company, and pay compensation to the Company,in a sum to be calculated at the rate of 2% of the relevant considerationalready paid. If the Company elects not to terminate the relevant CommercialProperty SPA, it will continue in force and the Vendor shall pay compensationto the Company, in a sum to be calculated at the rate of 0.02% per day untilthe relevant Office Unit is delivered. Car Park Spaces Transfer Agreement Date26 September 2014 Parties (i) the Company (as purchaser)(ii) the Vendor (as seller) Properties to be acquired The Vendor has agreed to sell, and the Company has agreed to purchase, all theCar Park Spaces, which comprise 50 car parking spaces on levels B1 and B2 ofthe office building No. 2 of Mingzhu International Business Center located atQianjiang New Town Lot Hang Zheng Chu Chu (2004) 43 A-C9, Jianggan District,Hangzhou, Zhejiang Province, the PRC. The Car Park Spaces were also built bythe Vendor. Consideration and payment terms The total consideration for the Car Park Spaces is RMB12,500,000 (equivalent toapproximately HK$15,875,000). Such consideration will become payable within 7days after the Car Park Spaces Transfer Agreement is signed and the Vendordelivers a formal invoice in relation to the Car Park Spaces in accordance withthe Car Park Spaces Transfer Agreement. If the Company fails to pay the consideration for a period of no more than 30days after the date when it becomes payable, the Company shall pay compensationto the Vendor, in a sum to be calculated at the rate of 0.01% per day until theconsideration is paid in full. If the Company fails to pay the considerationfor more than 30 days after the date when it becomes payable, the Vendor willbe entitled to elect whether or not to terminate the Car Park Spaces TransferAgreement. If the Vendor elects to terminate the Car Park Spaces TransferAgreement, the Company shall pay compensation to the Vendor, in a sum to becalculated at the rate of 0.02% per day. If the Vendor elects not to terminatethe Car Park Spaces Transfer Agreement, it will continue in force and theCompany shall pay compensation to the Vendor, in a sum to be calculated at therate of 0.02% per day until the consideration is paid in full. The consideration for the Car Park Spaces is to be satisfied by the Company incash and will be financed by the internal resources of the Group. The consideration for the Car Park Spaces was determined after arm's lengthnegotiation between the Company and the Vendor, based on normal commercialterms and by reference to the Valuation Report prepared by DTZ, an independentproperty valuer, in respect of the Properties. According to the ValuationReport, the market value of the Car Park Spaces as at 1 August 2014 wasestimated to be RMB14,300,000 (equivalent to approximately HK$18,161,000). Delivery of the Car Park Spaces The Vendor shall deliver the Car Park Spaces to the Company at the same timewhen the Office Units are delivered to the Company pursuant to the Commercial PropertySPAs. If the Vendor fails to deliver the Car Park Spaces for a period of no more than30 days, the Vendor shall pay compensation to the Company, in a sum to becalculated at the rate of 0.01% per day until the Car Park Spaces aredelivered. If the Vendor fails to deliver the Car Park Spaces for more than 30days, the Company will be entitled to elect whether or not to terminate the CarPark Spaces Transfer Agreement. If the Company elects to terminate the Car ParkSpaces Transfer Agreement, the Vendor shall return all the consideration alreadypaid by the Company, and pay compensation to the Company, in a sum to be calculatedat the rate of 0.02% per day. If the Company elects not to terminate the CarPark Spaces Transfer Agreement, it will continue in force and the Vendor shall paycompensation to the Company, in a sum to be calculated at the rate of 0.02% per day. INFORMATION OF THE GROUP The Company was established on 1 March 1997 in the PRC as a joint stock limitedcompany, the H Shares of which are listed on the Main Board of the StockExchange. The Group is principally engaged in (i) investments in, development,operation, management and collection of tolls of the Shanghai-Hangzhou-NingboExpressway, the Shangsan Expressway and the Jinhua section of the Ningbo-JinhuaExpressway, all of which are in the Zhejiang Province of the PRC, (ii)businesses ancillary to the operation of the expressways, such as billboardadvertising and operation of service areas on the expressways and (iii)securities brokerage, investment banking, asset management, margin financingand securities lending. INFORMATION OF THE VENDOR The Vendor is a limited liability company incorporated in the PRC on 18 October2004 with a registered capital of RMB50 million. The Vendor is a wholly-ownedsubsidiary of Communications Group and is principally engaged in thedevelopment of commercial and residential properties in Zhejiang Province, thePRC. REASONS FOR ENTERING INTO THE AGREEMENTS The current head office of the Company is located at 12/F, Block A, DragonCentury Plaza, Hangzhou, Zhejiang Province, the PRC, with a gross floor area of3,573.4 square metres. Due to expansion of the Company's business, its existinghead office has reached its maximum capacity. After the completion of theAcquisitions, the Company intends to occupy the Properties as its new headoffice. As disclosed in the Company's announcement dated 4 August 2014, ZheshangSecurities has agreed to purchase, and is planning to relocate its head officeto, the office building B6 of Mingzhu International Business Center. Theheadquarters of Communications Group and its subsidiaries in Hangzhou arelocated in office buildings No. 3 and 2 of Mingzhu International BusinessCenter, respectively. The relocation of the Company's head office to theProperties is therefore expected to create greater synergy between the Company,Zheshang Securities, Communications Group and its subsidiaries. Furthermore,the Properties are located in Qianjiang New Town, which is expected to becomethe new central business district of Hangzhou, and a number of leadingfinancial institutions and enterprises in Zhejiang Province have either movedin, or are planning to relocate to, this area. The Directors, including all of the independent non-executive Directors,consider that the terms of the transactions contemplated under the Agreementsare fair and reasonable, on normal commercial terms in the ordinary and usualcourse of business of the Group and are in the interests of the Company and theShareholders as a whole. LISTING RULES IMPLICATIONS As at the date of this announcement, the Communications Group beneficially owns2,909,260,000 Domestic Shares, representing approximately 67% of the issuedshare capital of the Company. By virtue of this shareholding interest,Communications Group is a substantial Shareholder (as defined under the ListingRules) and the Vendor, which is a wholly-owned subsidiary of CommunicationsGroup, is accordingly a connected person of the Company. The transactionscontemplated under the Agreements therefore constitute connected transactionsfor the Company under the Listing Rules. As each of the applicable percentage ratios in respect of the Acquisitions (inaggregate) is more than 0.1% but less than 5%, the Acquisitions are subject tothe reporting and announcement requirements but are exempt from the independentshareholders' approval requirement under Chapter 14A of the Listing Rules. None of the Directors have any material interest in the transactionscontemplated under the Agreements or is required to abstain from voting on therelevant board resolution approving the Agreements and the transactionscontemplated thereunder. DEFINITIONS "Acquisitions" the proposed acquisitions of the Properties by the Company from the Vendor pursuant to the terms and conditions of the Agreements; "Agreements" the Commercial Property SPAs and the Car Park Spaces Transfer Agreement; "Car Park Spaces" 50 car parking spaces at levels B1 and B2 of the office building No. 2 of Mingzhu International Business Center located at Qianjiang New Town Lot Hang Zheng Chu Chu (2004) 43 A-C9, Jianggan District, Hangzhou, Zhejiang Province, the PRC; "Car Park Spaces the underground car parking spaces transfer agreementTransfer in relation to the Car Park Spaces entered into between the CompanyAgreement" and the Vendor and dated 26 September 2014; "Commercial the commercial property sale and purchase agreementsProperty SPAs" in relation to all the Office Units entered into between the Company andthe Vendor and dated 26 September 2014, and each a "Commercial Property SPA"; "Communications Zhejiang Communications Investment Group Co.,Group" Ltd., a wholly State-owned enterprise established on 29 December 2001; "Company" Zhejiang Expressway Co., Ltd.; "connected shall have the meaning as ascribed thereto in thepersons" Listing Rules; "Directors" directors of the Company; "Domestic Shares" the domestic invested shares of RMB1.00 each in the share capital of the Company; "DTZ" DTZ Debenham Tie Leung (Shenzhen) Company Limited, an independent property valuer; "First Payment" shall have the meaning as ascribed thereto in the paragraph headed "Acquisition of Properties - Commercial Property S PAs - Consideration and payment terms" above; "Group" the Company and its subsidiaries; "HK$" Hong Kong dollars, the lawful currency of the Hong Kong Special Administrative Region of the PRC; "H Shares" the overseas listed foreign shares of RMB1.00 each in the share capital of the Company which are primarily listed on the Stock Exchange; "Listing Rules" the Rules Governing the Listing of Securities on the Stock Exchange; "Office Units" all office units in levels 4 to 7 of the office building No. 2 of Mingzhu International Business Center located at Qianjiang New Town Lot Hang Zheng Chu Chu (2004) 43 A-C9, Jianggan District, Hangzhou, Zhejiang Province, the PRC, and each an "Office Unit"; "PRC" the People's Republic of China; "Properties" the Office Units and the Car Park Spaces; "RMB" Renminbi, the lawful currency of the PRC; "Shareholders" shareholders of the Company; "Stock Exchange" The Stock Exchange of Hong Kong Limited; "Valuation Report" the valuation report dated 8 August 2014 in respect of the Properties issued by DTZ; "Vendor" Hangzhou Jinji Real Estate Co., Ltd., a wholly-owned subsidiary of the Communications Group; and "Zheshang Zheshang Securities Co., Ltd.,Securities" a 70.83% owned subsidiary of Zhejiang Shangsan Expressway Co., Ltd., which is a 73.625% owned subsidiary of the Company. In this announcement, translation of RMB to HK$ are based on an exchange rateof RMB1 to HK$1.27 which is used for illustration purpose only. By order of the Board Zhejiang Expressway Co., Ltd. Zhan Xiaozhang Chairman Hangzhou, PRC, 28 September 2014 As at the date of this announcement, the executive directors of the Company are:Mr. ZHAN Xiaozhang, Ms. LUO Jianhu and Mr. DING Huikang;the non-executive directors of the Company are: Mr. LI Zongsheng,Mr. WANG Weili and Mr. WANG Dongjie; and the independent non-executive directorsof the Company are: Mr. ZHANG Junsheng, Mr. ZHOU Jun and Mr. PEI Ker-Wei.