Zhejiang Expressway : DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO DISPOS...

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(A joint stock limited company incorporated in the People's Republic of China with limited liability)

On 17 October 2016, the Company as vendor and Zhejiang Communications Investment as purchaser entered into the Share Purchase Agreement pursuant to which the Company conditionally agreed to sell and Zhejiang Communications Investment conditionally agreed to purchase 100% equity interest in Development Co at a cash consideration of RMB249,660,000 (equivalent to approximately HK$291,931,712).

As one or more of the applicable percentage ratios in respect of the Disposal is over 5% but less than 25%, the Disposal constitutes a discloseable transaction for the Company and is subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

In addition, as at the date of this announcement, Communications Group holds approximately 67% of the issued share capital of the Company. By virtue of this shareholding interest, Communications Group is a controlling shareholder of the Company. Therefore, Zhejiang Communications Investment, as a wholly-owned subsidiary of Communications Group, is a connected person of the Company and as a result, the Disposal also constitutes a connected transaction for the Company and is subject to the reporting, announcement and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

The Company will put forward, among other things, an ordinary resolutions to approve the Disposal, at a general meeting to be convened by the Company for the Independent Shareholders' consideration and approval.

In view of the interest of Communications Group in the Share Purchase Agreement, Communications Group and its associates will abstain from voting at the general meeting to be convened by the Company to consider and approve the resolutions in relation to the Share Purchase Agreement.

An Independent Board Committee has been formed to consider the Disposal, and TC Capital International Limited has been appointed as the Company's independent financial adviser to advise the Independent Board Committee and the Independent Shareholders as to whether the terms of the Share Purchase Agreement are fair and reasonable and whether the Disposal is in the interests of the Company and the Shareholders as a whole.

A circular containing, among other things, (i) details of the Share Purchase Agreement, (ii) a letter from the Independent Board Committee to the Independent Shareholders regarding the Disposal, (iii) a letter of advice from the independent financial adviser to the Independent Board Committee and the Independent Shareholders regarding the Disposal, and (iv) a notice of general meeting, is expected to be dispatched to the Shareholders on or before 7 November 2016.

On 17 October 2016, the Company as vendor and Zhejiang Communications Investment as purchaser entered into the Share Purchase Agreement pursuant to which the Company conditionally agreed to sell and Zhejiang Communications Investment conditionally agreed to purchase 100% equity interest in Development Co at a cash consideration of RMB249,660,000 (equivalent to approximately HK$291,931,712).

Set out below is a summary of the principal terms of the Share Purchase Agreement.

1. Share Purchase Agreement

   Date

   17 October 2016

   Parties

   Vendor: The Company

   Purchaser: Zhejiang Communications Investment

   Assets to be disposed of

   100% equity interest in Development Co

   Consideration and payment terms

   The consideration for 100 % equity interest in Development Co i s RMB249,660,000 (equivalent to approximately HK$291,931,712), which will be payable by Zhejiang Communications Investment in cash within 10 Business Days after the Share Purchase Agreement becomes effective (i.e. all conditions precedent have been fulfilled).

   Conditions precedent

   Completion of the Share Purchase Agreement is subject to the fulfilment of the following conditions precedent:

2. approval of the Share Purchase Agreement by the Board;

3. approval of the Share Purchase Agreement by the Independent Shareholders;

4. approval of Share Purchase Agreement by the board of directors of Zhejiang Communications Investment; and

5. approval of the Share Purchase Agreement by the board of directors of Communications Group.

As at the date of this announcement, the conditions under paragraphs 1, 3 and 4 above have been satisfied.

Effective date

The Share Purchase Agreement will become effective upon satisfaction of all the conditions mentioned under the section headed "Conditions precedent" above. The parties have agreed, however, that if at any time after the Share Purchase Agreement becomes effective any relevant PRC governmental department with authority over the Share Purchase Agreement seeks to revoke such agreement so as to render performance of the Share Purchase Agreement impossible, the parties will terminate the Share Purchase Agreement and the Company will be required to repay all amounts already paid by Zhejiang Communications Investment under the Share Purchase Agreement together with interest at the benchmark bank lending interest rate for the same period.

6. Basis of consideration

   The consideration of RMB 249 , 660 , 000 ( equivalent to approximately HK$291,931,712) under the Share Purchase Agreement was determined based on arm's length negotiations between the Company and Zhejiang Communications Investment. A number of factors were considered by the parties when determining the consideration for the equity interest in Development Co, including, amongst others, the Valuation Report prepared by the Valuer.

   The Company relied on the Valuation Report in determining the consideration under the Share Purchase Agreement, pursuant to which the appraised value of the entire equity interest of Development Co as a t 31 July 2016 was RMB259,800,000. Taking into account the dividend of RMB10,140,297.98 paid by Development Co to the Company after 31 July 2016, the consideration was subsequently determined to be RMB249,660,000.

7. Principal assumptions for the income approach adopted for the Valuation Report

   The appraised value of the entire equity interest of Development Co under the Valuation Report was prepared using the income approach, through the use of the discounted cash flow method. As a result, such valuation constitutes a profit forecast under Rule 14.61 of the Listing Rules. Therefore, this announcement is subject to the requirements under Rules 14.60A and 14.62 of the Listing Rules in relation to profit forecast.

   As required under Rule 14.62(1) of the Listing Rules, details of the key assumptions used in determining the value of the entire equity interest in Development Co upon which the Valuation Report was issued are set out below:

   Basic assumptions

   • There will be no great changes in national macroeconomic situations, current bank interest rate, tax policies, etc.;

   • There will be no great changes in economic, political and social situations of the region where Development Co is located;

   • Operators of Development Co are responsible persons and the management of Development Co are competent at their jobs;

   • Development Co fully complies with all applicable laws and regulations;

   • The accounting policies to be adopted by Development Co in the future will be basically consistent with those used for the preparation of this report in all major respects;

   • On the basis of the existing management methods and management level, Development Co keeps its business scope and operating mode consistent with the current orientation of development;

   • There are no great adverse effects caused by other unpredictable factors and force majeure.

     Specific assumptions

   • There will be no great changes in national basic policies on operation of service area, and future development of the industry will be stably connected with overall changes of national economy;

   • Human resources, management team and business management of Development Co in the future will remain at the current level, except for what have clearly adjusted;