Connected Transaction - Disposal of Maintenance Co

ZHEJIANG EXPRESSWAY CO., LTD

Hong Kong Exchanges and Clearing Limited and The Stock  Exchange  of  Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole 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)
(Stock code: 0576)

CONNECTED TRANSACTION
IN RELATION TO
DISPOSAL OF 100% EQUITY INTEREST IN MAINTENANCE CO

THE DISPOSAL
On 31 August 2015, the Company as vendor and Resources Co as purchaser entered into the Maintenance  Co  Agreement,  pursuant  to  which  the  Company  agreed to sell 100% of the equity interest held by the Company in Maintenance Co to Resources Co at the consideration of RMB38,342,600 (equivalent to approximately HK$46,508,576).

RELATIONSHIP BETWEEN THE PARTIES
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 substantial shareholder (as defined in the Listing Rules) of the Company. Therefore, Resources Co, as wholly owned subsidiary of Communications Group, is a connected  person  of  the  Company  and  as  a  result, the Disposal constitutes a connected transaction for the Company pursuant to Rule 14A.07(1) of the Listing Rules.

LISTING RULES IMPLICATIONS
As the relevant percentage ratio for the Disposal is over 0.1% but less than 5%, the Disposal is subject to the reporting and announcement requirements only but exempt from the independent Shareholders' approval requirement under Rule 14A.36 of the Listing Rules.

Each of Mr, Zhan Xiaozhang, Mr. Wang Dongjie, Mr. Dai Benmeng and Mr. Zhou Jianping holds a position in Communications Group, so they have abstained  from voting on the board resolutions with respect to the approval of the Maintenance Co Agreement. 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 Disposal or is required to abstain from voting on the relevant Board resolutions to approve the same.

THE DISPOSAL
On 31 August 2015, the Company as vendor and Resources Co as purchaser entered into the Maintenance Co Agreement, pursuant to which the Company agreed to sell 100% of the equity interest held by the Company in Maintenance Co to Resources Co at the consideration of RMB38,342,600 (equivalent to approximately HK$46,508,576).

Set out below is a summary of the principal terms of the Maintenance Co Agreement.

Date:	31 August 2015
Parties:	(1) the Company as vendor; and
	(2) Resources Co as purchaser
Assets to be disposed:	100% of the equity interest in Maintenance Co.
Consideration:	RMB38,342,600, which will be settled by cash within 30 Business Days after the Maintenance Co Agreement becomes effective (i.e. all the conditions precedent have been fulfilled)
Conditions precedent:	The Disposal is subject to the fulfilment of the following conditions precedent:
	(a) approval of the Disposal by the Board;
	(b) approval of the Disposal by the board of directors of Resources Co;
	(c) approval of the Disposal by the board of directors of Communications Group; and
	(d) the obtaining of necessary consents and approvals from relevant authorities.
	As at the date of this announcement, the conditions under paragraph (a), (b), (c) and (d) above have been satisfied.

Basis of the Consideration
The above consideration was determined after arm's length negotiations between the parties in accordance with applicable PRC laws and regulations, with reference to the appraised net assets value of Maintenance Co as at 30 June 2015. The appraisal was conducted by a qualified PRC domestic valuer, by using the asset-based methods.

Information on Maintenance Co
Maintenance Co is a wholly owned subsidiary of the Company which is incorporated under the laws of the PRC on 28 January 2014. Maintenance Co is principally engaged in construction of transportation projects and maintenance of toll road.

According to the appraisal of Maintenance Co, as at the valuation reference date (i.e. 30 June 2015), the appraisal result of the net asset of Maintenance Co was RMB38,342,600; and the appraised value of the 100% equity interest held by the Company in Maintenance Co amounts to net assets of RMB38,342,600.

A summary of the audited financial information of Maintenance Co for the financial years ended 31 December 2013 and 2014 is set out below:

	For the year ended	For the year ended
	31 December 2014	31 December 2013*
	(RMB)	(RMB)
Turnover	101,566,237.88	N/A
Profit before taxation	7,876,115.16	N/A
Profit after taxation	5,062,177.16	N/A

*Note: Maintenance Co was incorporated on 28 January 2014.

Maintenance Co will no longer be a subsidiary of the Company upon completion of the Disposal.

REASONS FOR AND BENEFITS OF THE DISPOSAL
The Company intends not to engage in high-grade road maintenance business. The Disposal will allow the Company to focus on expressway operation business, and will streamline the Company's existing business segments and operations, and sharpen the Company's strategic focus on its core business. Therefore, the Company entered into the Maintenance Co Agreement to carry out the Disposal.

Based on the Hong Kong Financial Reporting Standards, it is expected that the Group will make a gain of approximately RMB879,000 from the Disposal.

The Group intends to apply the sales proceeds as its general working capital.

The Directors (including the independent non-executive Directors) consider that the Maintenance Co Agreement was entered into in the ordinary and usual course of business of the Group and on normal commercial terms which were arrived at after arm's length negotiations between the parties and the Disposal is fair and reasonable and in the interests of the Group and the Shareholders as a whole.

INFORMATION ON PARTIES INVOLVED IN THE CONNECTED TRANSACTION
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.

Communications Group is a  wholly  State-owned  enterprise  established  in  the  PRC on 29 December 2001 and is principally engaged in a diverse range of businesses, including investment, operations,  maintenance,  toll  collection  and  ancillary  services of expressways, construction and building of transportation project, ocean and coastal transport, as well as real estate.

Resources Co is a company incorporated in the PRC on 10 August  2015,  which  is wholly owned by Communications Group, the controlling shareholder of the Company. Resources Co is principally engaged in industrial investment, investment management and construction and maintenance of roads.

RELATIONSHIP BETWEEN THE PARTIES AND 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 substantial shareholder (as defined in the Listing Rules) of the Company. Therefore, Resources Co, as wholly owned subsidiary of Communications Group, is a connected person of the Company and as a result, the Disposal constitutes a connected transaction for the Company pursuant to Rule 14A.07(1) of the Listing Rules.

As the relevant percentage ratio for the Disposal is over 0.1% but less than 5%, the Disposal is subject to the reporting and announcement requirements only but exempt from the independent Shareholders' approval requirement under Rule 14A.36 of the Listing Rules.

Each of Mr, Zhan Xiaozhang, Mr. Wang Dongjie, Mr. Dai Benmeng and Mr. Zhou Jianping holds a position in Communications Group, so they have abstained from voting on the board resolutions with respect to the approval of the Maintenance Co Agreement. 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 Disposal or is required to abstain from voting on the relevant Board resolutions to approve the same.

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

"Board"	the Board of Directors
"Business Day"	any day other than a Saturday or Sunday or a public holiday in the PRC, on which banks are generally open for business in the PRC
"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(s)"	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 director(s) of the Company
"Disposal"	the disposal transaction  conte mplated  in  the Maintenance Co Agreement
"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
"Hong Kong"	the Hong Kong Special Administrative Region of the PRC
"HK$"	Hong Kong dollars, the lawful currency of Hong Kong
"Listing Rules"	Rules Governing the Listing of Securities on The Hong Kong Stock Exchange
"Maintenance Co"	Zhejiang Expressway Maintenance Co., Ltd.*, a  company  incorporated in the PRC and a wholly owned subsidiary of the Company
"Maintenance Co Agreement"	The agreement dated 31 August 2015 entered into between the Company and Resources Co, pursuant to which  the  Company  conditionally  agreed  to  dispose 100% equity interest in Maintenance Co to Resources Co
"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)
"Resources Co"	Zhejiang Communications Resources Investment Co., Ltd.*, a company incorporated in the PRC and a wholly owned subsidiary of the Communications Group
"RMB"	Renminbi, the lawful currency of the PRC
"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
"%"	per cent.
* English names for reference only.

In this announcement, the translation of RMB into HK$ is based on the exchange of rate of HK$1 to RMB0.82442. Such conversion shall not be construed as a representation that amounts in RMB were or may have been converted into HK$ using such exchange rate or any other exchange rate or at all.

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

Hangzhou, PRC, 31 August 2015

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.