Information System Redevelopment Agreements

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ZHEJIANG EXPRESSWAY CO. LTD.
(A joint stock limited company incorporated in the People's Republic of China with limited liability)
(Stock code: 0576)

CONTINUING CONNECTED TRANSACTIONS
INFORMATION SYSTEM REDEVELOPMENT AGREEMENTS

INFORMATION SYSTEM REDEVELOPMENT AGREEMENTS

On 23 May 2016, the Company organised a public tender in respect of the provision of the Information System Redevelopment Services to the Target Expressways, namely the Shanghai-Hangzhou-Ningbo Expressway, the Shangsan Expressway, Jinhua section, Ningbo-Jinhua Expressway and the Hanghui Expressway. Zhejiang IT Engineering Co succeeded in the tender and was awarded a contract to provide the Services.

On 13 September 2016, the Company and the relevant subsidiaries of the Company entered into the Information System Redevelopment Agreements with Zhejiang IT Engineering Co, pursuant to which Zhejiang IT Engineering Co agreed to provide the Information System Redevelopment Services to the Target Expressways for a period of 12 months ending 12 September 2017. Under the Listing Rules, the Information System Redevelopment Agreements shall be aggregated as if they were one transaction.

LISTING RULES IMPLICATIONS

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 IT Engineering Co, as a wholly-owned subsidiary of Communications Group, is a connected person of the Company and as a result, the transactions under the Information System Redevelopment Agreements constitute connected transactions for the Company under Chapter 14A of the Listing Rules.

As the applicable percentage ratios in respect of the transactions contemplated under the Information System Redevelopment Agreements, on an aggregated basis,  are more than 0.1% but less than 5%, the Information System Redevelopment Agreements are subject to the reporting, announcement and annual review requirements but exempt from the independent Shareholders' approval requirement under Chapter 14A of the Listing Rules.

THE INFORMATION SYSTEM REDEVELOPMENT AGREEMENTS

Principal terms of the Information System Redevelopment Agreements are set out below:

Date:	13 September 2016
Parties:	(1)	the Company and the relevant subsidiaries of the Company  (namely  Shangsan  Co, Jiaxing  Co, Jinhua Co and Hanghui Co); and
	(2)	Zhejiang IT Engineering Co
Subject matter:	Zhejiang IT Engineering Co agreed to provide the Information System Redevelopment Services, which include the sourcing and installation of automatic ticketing machines, ETC licence plate identification system, ETC display boards, surveillance cameras, composite card readers, printing machines, digital video recorders, routers, switches and handheld scanners in respect of the Target Expressways.
Service fee and basis of the fee:	the aggregate service fee payable by the Group to Zhejiang IT Engineering Co under the Information System Redevelopment Agreements shall be RMB30,984,318.61 (the "Service Fee").
	The Service Fee was determined as a result of a public tender (the "Public Tender") of the Information System Redevelopment Services for the Target Expressways, where Zhejiang IT Engineering Co has succeeded in its bid pursuant to the terms of the Public Tender.
	On 23 May 2016, a tender notice in respect of the Public Tender was published on the website of Communications Group and www.chinabidding.com. cn. Eleven entities expressed their interest and each of them made the relevant payment to the Company to obtain the tender documents for the Public Tender. After their internal consideration,  four  entities  (three of which being independent suppliers) eventually submitted their tender to the Company.
	Tender evaluation was conducted by a committee consisting of five experts in this industry. The committee evaluated the following factors before deciding to recommend to accept the tender submitted by Zhejiang IT Engineering Co: (1) the working plan proposed by the tenderers and their technical capability; (2) the standard of safety management of the tenderers and their capability of handling emergency events; (3) the quality of work and ability to deliver work on a timely manner; (4) the experience of the tenderers in similar projects; and (5) the reputation of the tenderers.
	To ensure that the terms offered by Zhejiang IT Engineering Co are fair, reasonable and no less favourable than those provided by the independent third parties to the Group, the Company has compared the price offered by each of the tenderers for the Information System Redevelopment Services and the price offered by each of the independent suppliers is higher than that offered by Zhejiang IT Engineering Co.
	After taking into account the above evaluation criteria, the management of the Company has decided to accept the committee's recommendation and award a contract for the Information System Redevelopment Services to Zhejiang IT Engineering Co.
Terms of payment:	The Service Fee shall be payable by the Group to Zhejiang IT Engineering Co as follows:
	(i)	30% of the Service Fee to be payable on or before 27 September 2016;
	(ii)	60% of the Service Fee to be payable upon completion of the relevant Information System Redevelopment Services;
	(iii)	5% of the Service Fee to be payable on or before the expiration of 12 months after completion of the relevant Information System Redevelopment Services; and
	(iv)	5% of the Service Fee to be payable on or before the expiration of 24 months after completion of the relevant Information System Redevelopment Services.

Cap for the Information System Redevelopment Agreements

For the purpose of complying with Chapter 14A of the Listing Rules, the Company has set a cap in respect of the aggregate fees payable by the Group to Zhejiang IT Engineering Co for the Information System Redevelopment Services during the term of the Information System Redevelopment Agreements, which shall not exceed RMB30,984,318.61, being the Service Fee.

The above cap was determined after taking into account the total service fees payable to Zhejiang IT Engineering Co in respect of the Information System Redevelopment Services under the Information System Redevelopment Agreements.

REASONS FOR AND BENEFITS OF THE TRANSACTION

The redevelopment of the information system used by the Group is essential to the efficient operation of its expressways. The Company considered the use of the Public Tender to obtain quotations from independent third parties as an effective means to reducing the costs of redeveloping the Group's information system. In addition, the Company considered that Zhejiang IT Engineering Co has the relevant qualifications and expertise to provide the Information System Redevelopment Services to the Company. Given that Zhejiang IT Engineering Co has offered the lowest service fees and better service terms (including the quality of the products to be supplied, quality control standard and after sale services) amongst other independent third parties, the Company has awarded the contract for the Information System Redevelopment Services to Zhejiang IT Engineering Co.

Given the above, the Directors (including the independent non-executive Directors) are of the view that the terms of the Information System Redevelopment Agreements 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 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 IT Engineering Co, as a wholly-owned subsidiary of Communications Group, is a connected person of the Company and as a result, the transactions under the Information System Redevelopment Agreements constitute connected transactions for the Company under Chapter 14A of the Listing Rules.

As the applicable percentage ratios in respect of the transactions contemplated under the Information System Redevelopment Agreements, on an aggregated basis, are more than 0.1% but less than 5%, the Information System Redevelopment Agreements are subject to the reporting, announcement and annual review requirements but exempt from the independent Shareholders' approval requirement under Chapter 14A of the Listing Rules.

Each of Mr. Zhan Xiaozhang, Mr. Wang Dongjie, Mr. Dai Benmeng and Mr. Zhou Jianping holds certain senior position in Communications Group, so they have abstained from voting on the board resolution with respect to the approval of the Information System Redevelopment Agreements. Save for Mr. Zhan Xiaozhang, Mr. Wang Dongjie, Mr. Dai Benmeng and Mr. Zhou Jianping, none of the Directors has  any  material interest in the Information System Redevelopment Agreements or is required to abstain from voting on the relevant Board resolutions to approve the same.

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 operation of gas stations, restaurants and shops in service areas, advertising at expressway interchanges and external road maintenance, as well as securities related business

Zhejiang IT Engineering Co is a wholly-owned subsidiary of Communications Group which is incorporated under the laws of the PRC. Zhejiang IT Engineering Co is principally engaged in research and development, manufacturing and sales of intelligent transportation and information technology products, road tolling, communication and surveillance systems, provision of technical advisory services for electrical and mechanical systems of tunnels, professional maintenance services and engineering, procurement and construction (EPC) services.

DEFINITIONS

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

"Board"	the board of Directors
"Communications Group"	Zhejiang Communications Investment Group Co., Ltd., a wholly State-owned enterprise established in the PRC, and the controlling shareholder of the Company
"Company"	Zhejiang Expressway Co., Ltd, a joint stock limited company incorporated in the PRC with limited liability
"connected person"	has the meaning ascribed to it under the Listing Rules
"controlling shareholder"	has the meaning ascribed to it under the Listing Rules
"Director(s)"	the directors of the Company
"Group"	the Company and its subsidiaries
"H Shares"	overseas listed foreign shares in the share capital of the Company with a nominal value of RMB1 per share, which are listed on the Main Board of the Stock Exchange
"Hanghui Co"	Zhejiang Hanghui Expressway Co., Ltd., a 88.674% owned subsidiary of the Company
"Hong Kong"	the Hong Kong Special Administrative Region of the PRC
"Information System Redevelopment Agreements"	A number of agreements entered into between the Company and the relevant subsidiaries of the Company on one hand and Zhejiang IT Engineering Co on the other hand dated 13 September 2016 in respect of the provision of the Information System Redevelopment Services by Zhejiang IT Engineering Co
"Information System Redevelopment Services	information system redevelopment services including the sourcing and installation of automatic  ticketing machines, ETC licence plate identification system, ETC display boards, surveillance cameras, composite card readers, printing machines, digital video recorders, routers, switches and handheld scanners
"Jiaxing Co"	Zhejiang Jiaxing Expressway Co., Ltd., a 99.9995% owned subsidiary of the Company
"Jinhua Co"	Zhejiang Jinhua Yongjin Expressway Co., Ltd., a wholly-owned subsidiary of the Company
"Listing Rules"	Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
"percentage ratio"	has the meaning ascribed to it under Rule 14.04(9) of the Listing Rules
"PRC"	the People's Republic of China (for the purpose of this announcement, excludes Hong Kong, Macau and Taiwan)
"RMB"	Renminbi, the lawful currency of the PRC
"Shangsan Co"	Zhejiang Shangsan Expressway Co., Ltd. a 73.625% owned subsidiary of the Company
"Shareholder(s)"	holder(s) of the share(s) of the Company
"Stock Exchange"	The Stock Exchange of Hong Kong Limited
"subsidiary(ies)"	has the meaning ascribed to it under the Listing Rules
"Target Expressways"	Jinhua section, Ningbo-Jinhua Expressway, the Hanghui Expressway, Shanghai-Hangzhou-Ningbo Expressway and the Shangsan Expressway
"Zhejiang IT Engineering Co"	Zhejiang Expressway Information Technology Engineering Co., Ltd. a wholly-owned subsidiary of Communications Group

On behalf of the Board          
ZHEJIANG EXPRESSWAY CO., LTD.
ZHAN Xiaozhang              
Chairman                 

Hangzhou, PRC, 13 September 2016

As of 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, Mr. DAI Benmeng and Mr. ZHOU Jianping; and the independent non-executive directors of the Company are: Mr. ZHOU Jun, Mr. PEI Ker-Wei and Ms. LEE Wai Tsang Rosa