Joint Announcement: Discloseable Transaction - Acquisition of 100% Interest in the Project Company of Hunan Yichang Expressway

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The respective board of directors of SZ International and SZ Expressway (a 50.889%-owned subsidiary of SZ International) are pleased to announce that on 20 January 2017, SZ Expressway (as purchaser) and Pingan Innovation (as vendor) entered into the Transfer Agreement, pursuant to which SZ Expressway agreed to acquire 100% interest in Yichang Company from Pingan Innovation at a cash consideration of RMB1,270 million (approximately HK$1,426 million). The major asset of Yichang Company is the operation rights of Yichang Expressway. Yichang Expressway is a two-way expressway with four lanes which starts from Zijiang Second Bridge, Yiyang City, Hunan and ends in Deshan Tanshuping, Changde City, Hunan with a total length of approximately 73.1 km for its main lane. It is a section of the connection line from Zhangjiajie to Changsha (G5513) of the G55 Erguang Expressway, the sixth vertical line of the national expressway network, and also a main component of the skeleton of the Hunan Expressway Plan "five vertical and seven horizontal".

Yichang Expressway has maintained a good trading record of having a steady growth in its traffic volume and toll revenue since its opening in 1999. Its average daily toll revenue in 2015 and 2016 was RMB930,100 and RMB1,069,600, respectively.

Upon completion of the Transaction, Yichang Company will be wholly-owned by SZ Expressway and become a subsidiary of SZ International and SZ Expressway.

The investment, construction, operation and management of toll highways and roads are in the ordinary and usual course of business of SZ Expressway. The directors of SZ Expressway are of the view that Yichang Expressway is situated in a superior location with good investment value. The obtaining of interest in Yichang Expressway through acquisition of Yichang Company at a reasonable price helps to expand the asset scale and profit base and increase the stable cash flow of SZ Expressway. The Transaction will also further strengthen SZ Expressway's core advantages in the investment, management and operation of the highways, which is in line with its development strategy and overall interests. The Transaction is also in line with SZ International's strategy to consolidate premium infrastructure resources. SZ Expressway is a subsidiary of SZ International, further strengthening the core advantages in core business of SZ Expressway is beneficial to SZ International as a whole.

For SZ International and SZ Expressway, as one or more applicable percentage ratios of the Transaction are above 5% but less than 25%, the Transaction constitutes a discloseable transaction and is subject to the requirements of reporting and announcement but exempt from the requirement of approval by shareholders under Chapter 14 of the Listing Rules.

The principal terms of the Transfer Agreement are as follows:

Date: 20 January 2017

Parties: (1) SZ Expressway (as purchaser); and

(2) Pingan Innovation (as vendor).

To the best knowledge and belief of the respective board of directors of SZ International and SZ Expressway and having made all reasonable enquiries, each of Pingan Innovation and its ultimate beneficial owner(s) is independent third party of SZ International and SZ Expressway respectively.

Subject of the Transaction:

Pursuant to the Transfer Agreement, SZ Expressway agreed to acquire and Pingan Innovation agreed to sell 100% interest in Yichang Company.

Consideration and Payment arrangements:

The consideration for the acquisition of 100% interest in Yichang Company is RMB1,270 million (approximately HK$1,426 million), which shall be paid in cash by SZ Expressway in the following manners:

1. the first instalment of RMB635 million (approximately HK$713 million) (representing 50% of the total consideration) shall be paid to the bank account designated by Pingan Innovation within 5 business days from the date of the Transfer Agreement; and

2. on the date of the Transfer Agreement, both parties shall enter into an escrow account agreement with the escrow bank approved by them to open an escrow account to be co-managed by both parties in the name of Pingan Innovation within 5 business days. Within 5 business days upon the opening of the escrow account, SZ Expressway shall deposit the second installment of RMB635 million (approximately HK$713 million) (representing 50% of the total consideration) into the escrow account and the escrow bank shall release the second installment to Pingan Innovation after receipt of the relevant documentary proof that SZ Expressway has been registered as the sole shareholder of Yichang Company.

The above consideration will be funded by SZ Expressway's internal resources and/or borrowing.

Basis of the Consideration:

Upon competitive negotiation, the consideration was determined after arm's length negotiations between SZ Expressway and Pingan Innovation on normal commercial terms.

The principal business of Yichang Company is the operation and management of Yichang Expressway. Based on the investment and operation experiences and the professional abilities towards the expressway projects in the past, SZ Expressway comprehensively considered factors including the traffic flow, operation, policy environment and the maturity of Yichang Expressway (including its Changde connection line) for assessing the estimated value of Yichang Company; and took into account the valuation report prepared by DP International, which are the major factors in negotiating the consideration of the Transaction. The income approach was adopted in the valuation of 100% interest in Yichang Company (constitutes a profit forecast under Rule 14.61 of the Listing Rules) as at 31 December 2016 prepared by DP International. Further details of the assumptions used for the profit forecast are set out under the section headed "Valuation" below.

Conditions Precedent:

Completion of the Transfer Agreement is subject to fulfilment of, among others, the following conditions:

1. the financial creditors of Yichang Company (i.e. Changsha City Simenkou Branch of Industrial and Commercial Bank of China, Changde City Deshan Branch of

   Industrial and Commercial Bank of China and Hunan Branch of Bank of China) having given consent on the Transaction; and

2. the relevant governmental authorities (including but not limited to the Department of Transportation of Hunan Province) having granted the relevant approval for the Transaction.

Profit Distribution:

The base date of the Transaction is 31 December 2016.

All undistributed profit of Yichang Company as at 31 December 2016 shall belong to Pingan Innovation. It is agreed by the parties that the amount of undistributed profit of Yichang Company as at 31 December 2016 is RMB466.99 million (approximately HK$524.71 million). Within 15 business days from the completion of the business registration of the transfer of equity interest in Yichang Company, SZ Expressway should procure Yichang Company to distribute the aforesaid undistributed profit to Pingan Innovation, and no change shall be made to such amount of undistributed profit even if there will be any adjustment to the accounting policies of Yichang Company.

From 1 January 2017 onwards, all profit of Yichang Company shall belong to SZ Expressway.

Arrangement regarding the Renovation Project:

Yichang Expressway has implemented a renovation project in 2014 and the completion inspection and acceptance work of such project has not yet finished as at the date of the Transfer Agreement. Both parties agreed that if the final settlement project costs exceeds RMB683.66 million (approximately HK$768.16 million) (exclusive of any additional fee agreed by SZ Expressway or fee incurred in the additional works conducted after the completion date), Pingan Innovation will make corresponding reimbursement to Yichang Company. Furthermore, Pingan Innovation will also recognize, coordinate, and assist to resolve any possible dispute in relation to the execution of contracts and settlement of payment of the renovation project after the completion date.

Transfer of Equity Interest and Transitional Arrangement:

Pursuant to the Transfer Agreement, completion of the Transfer Agreement shall take place on the day that the escrow bank releases the second installment of the consideration to Pingan Innovation in accordance with the escrow account agreement (or the next business day as agreed by the parties). The parties should conduct the transfer of the company seal, licenses, financial statements and bank accounts of Yichang Company on the completion date and in any event such date shall not be later than 6 months after the date of the Transfer Agreement or such other later days as agreed by the parties in writing.

Upon completion of the transfer of the equity interest in Yichang Company, if it is found that Yichang Company has any contingent liabilities, contingent fee or contingent revenue (the agreed profit distribution and renovation project exclusive)

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