CONNECTED TRANSACTION

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 ACQUISITION OF 4.775% EQUITY INTEREST IN ZHEJIANG EXPRESSWAY INVESTMENT DEVELOPMENT CO., LTD. ACQUISITION On 13 August 2010, the Company entered into the Acquisition Agreement with the Vendor whereby the Company has conditionally agreed to purchase from the Vendor an aggregate 4.775% equity interest in Development Co held by the Vendor (of which 3.9% are held by the Connected Persons) subject to the conditions and in accordance with the terms of the Acquisition Agreement. LISTING RULES IMPLICATIONS The Connected Persons comprise, Mr. Jiang, Mr. Zhang and Mr. Fang, who are connected persons of the Company for the purposes of Chapter 14A of the Listing Rules. Therefore the Acquisition constitutes a connected transaction of the Company. Since each of the applicable percentage ratios in respect of the 3.9% equity interest in Development Co held by the Connected Persons in relation to the Acquisition is less than 5%, the Acquisition is therefore subject to the reporting and announcement requirements but is exempt from the independent shareholders' approval requirement under the Listing Rules. As the Acquisition is subject to the approval of the State Asset Management Bureau under Zhejiang Provincial Government, the Acquisition may or may not proceed. Shareholders of the Company and potential investors should therefore exercise caution when dealing in the shares of the Company. On 13 August 2010, the Company entered into the Acquisition Agreement with the Vendor whereby the Company has conditionally agreed to purchase from the Vendor an aggregate 4.775% equity interest in Development Co held by the Vendor (of which 3.9% are held by the Connected Persons) subject to the conditions and in accordance with the terms of the Acquisition Agreement. ACQUISITION AGREEMENT Date 13 August 2010 Parties The Vendor Company Assets to be acquired 4.775% equity interest in Development Co Consideration The aggregate consideration for the Acquisition is RMB8,996,100 (equivalent to approximately HK$10,222,841) and the consideration will be satisfied by the Company in cash. The consideration for the Acquisition was determined after arm's length negotiation between the parties based on normal commercial terms and with reference to the audited net asset value of Development Co for the year ended 31 December 2009. Conditions precedent The Acquisition Agreement is conditional on obtaining the approval of the State Asset Management Bureau under Zhejiang Provincial Government. Completion The Acquisition Agreement shall take effect on the date on which all relevant approvals and consents have been obtained. Completion of the Acquisition Agreement shall take place when the consideration for the Acquisition is settled in full and the Vendor execute any transfer documents pertaining to the Acquisition. INFORMATION OF THE GROUP 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. The main business of the Group is the investment in, operation and management of, and collection of tolls on the Expressways. The Group also carry out certain ancillary businesses such as automobile servicing, operation of gas stations and billboard advertising along the Expressways, as well as securities business. INFORMATION OF DEVELOPMENT CO Development Co is a limited liability company incorporated in the PRC on 28 May 2003. The registered capital of Development Co is RMB120,000,000 (equivalent to approximately HK$136,363,636). Development Co is principally engaged in the operation of the Services Area along the 247.6km Shanghai-Hangzhou-Ningbo Expressway and the 142km Shangsan Expressway in the Zhejiang Province owned by the Company and Shangsan Co respectively, and through its subsidiaries, billboard advertising as well as vehicle servicing operations along the two expressways. The net asset attributable to owners of Development Co based on its audited financial statements for the financial year ended 31 December 2009 is RMB198,624,877.15 (equivalent to approximately HK$225,710,088). The net profit/(loss) before and after tax and extraordinary items of Development Co based on its audited financial statements for the financial years ended 31 December 2008 and 2009 are as follows: For the For the period ended period ended 31 December 31 December 2008 2009 RMB'000 RMB'000 net profit/(loss) before tax and extraordinary items 100,718 68,032 net profit/(loss) after tax and extraordinary items 84,405 46,709 REASONS FOR AND BENEFITS OF THE ACQUISITION Pursuant to the Opinion, save in circumstances set out in the Opinion, employees of state-owned enterprise may not directly or indirectly hold shares in the affiliates and subsidiaries of state-owned enterprise. Senior and middle management staff of the state-owned enterprise holding such shares are required to transfer such shares or to resign from their office. The Vendor has agreed to sell her 4.775% equity interest in Development Co to the Company in accordance with the Opinion. The Directors (including all of the independent non-executive Directors) believe that the terms of the transaction are fair and reasonable and in the interests of the shareholders as a whole. CONNECTED TRANSACTION Amongst the Connected Persons, Mr. Jiang and Mr. Zhang are the directors of the Company and Mr. Fang is a supervisor of the Company. Under the Listing Rules, Mr. Jiang, Mr. Zhang and Mr. Fang are connected persons of the Company and accordingly the entry into of the Acquisition Agreement is a connected transaction for the Company within the meaning of the Listing Rules. Each of the applicable percentage ratios in respect of the 3.9% equity interest in Development Co held by the Connected Persons in relation to the Acquisition is less than 5%, the Acquisition is therefore subject to the reporting and announcement requirements but is exempt from the independent shareholders' approval requirement under the Listing Rules. Save for Mr. Jiang and Mr. Zhang, none of the Directors has any material interest in the transactions contemplated under the Acquisition Agreement. Mr. Jiang and Mr. Zhang have abstained from voting on the board resolution approving the Acquisition Agreement and the transactions contemplated thereunder. The original capital contribution in Development Co by the Connected Persons was RMB4,680,000 (equivalent to approximately HK$5,318,182). GENERAL The Company is expected to enter into agreements with the remaining shareholders of Development Co to acquire the remaining 44.225% equity interest in Development Co. Further announcement will be made once the Company enters into the definitive agreements to acquire the remaining 44.225% equity interest in Development Co and the Company will comply with the applicable reporting, announcement and independent shareholders' approval requirements under the Listing Rules when entering into such definitive agreements. Upon completion of the Acquisition and the acquisition of the remaining 44.225% equity interest in Development Co, Development Co will become a wholly-owned subsidiary of the Company. The Company may consider disposing its entire 100% equity interest in Development Co to Communications Investment Group in the future, and such disposal would depend on various factors, such as the valuation of the net asset value of Development Co and the negotiations of the terms of the sale between the parties. At present, there are no concrete plans to make such disposal. Further announcement will be made if the Company enters into any definitive agreement to dispose of its 100% equity interest in Development Co and the Company will comply with the applicable reporting, announcement and independent shareholders' approval requirements under the Listing Rules when entering into such definitive agreement. Definitions "Acquisition" the acquisition by the Company from the Vendor of 4.775% equity interest in Development Co pursuant to the terms and conditions of the Acquisition Agreement "Acquisition Agreement" the conditional sale and purchase agreement dated 13 August 2010 between the Vendor and the Company relating to the Acquisition "Ancillary Businesses" Ancillary businesses of the Group involving billboard advertising, operation of the Service Areas and the business of provision of towing and repair of vehicles and emergency services to users on the Expressways "Communications Zhejiang Communications Investment Group Co., Ltd., a Investment Group" wholly State-owned enterprise established on December 29, 2001 in PRC and a controlling shareholder of the Company "Company" Zhejiang Expressway Co., Ltd. "Connected Persons" Mr. Jiang, Mr. Zhang and Mr. Fang, who collectively hold 3.9% of the equity interest in Development Co "connected persons" shall have the same meaning as ascribed thereto in the Listing Rules "Development Co" Zhejiang Expressway Investment Development Co., Ltd, a 51% owned subsidiary of the Company "Directors" the directors of the Company "Expressways" the Shanghai-Hangzhou-Ningbo Expressway and the Shangsan Expressway "Group" the Company and its subsidiaries "HK$" Hong Kong dollars, the lawful currency of Hong Kong "Hong Kong" the Hong Kong Special Administrative Region of the PRC "Listing Rules" The Rules Governing the Listing of Securities on the Stock Exchange "Mr. Fang" Mr. Fang Zhexing, a supervisor of the Company "Mr. Jiang" Mr. Jiang Wenyao, an executive director of the Company "Mr. Zhang" Mr. Zhang Jingzhong, an executive director of the Company "Opinion" Opinion of SASAC on regulating shareholdings and investment of employees of state-owned enterprises (Guo Zi Fa Gai Ge [2008] No. 139) published on 8 October 2008 "PRC" The People's Republic of China "RMB" Renminbi, the lawful currency of the PRC "SASAC" State-owned Assets Supervision and Administration Commission of the State Council "Service Areas" Service areas along the Expressways which provide food catering, petrol filing, parking and vehicle repair services for users of the Expressways "Shanghai-Hangzhou-Ningbo the 247.5km Shanghai-Hangzhou-Ningbo Expressway in Expressway" the Zhejiang Province owned by the Group "Shangsan Co" Zhejiang Shangsan Expressway Co., Ltd, a 73.625% owned subsidiary of the Company in the PRC "Shangsan Expressway" The 142km Shangsan Expressway in Zhejiang Province owned by Shangsan Co "Stock Exchange" The Stock Exchange of Hong Kong Limited "Vendor" Ms Huang Qiuxia acting as nominee on behalf of the following parties who own in aggregate 4.775% of the equity interest in the registered share capital of Development Co: (i) Connected Persons; and (ii) One independent third party, who is not connected with the directors, promoters, supervisors, chief executive or substantial shareholders of the Company or its subsidiaries or any of their respective associates In this announcement, the translation of RMB into HK$ is based on the exchange of rate of HK$1 to RMB0.88. Such conversion shall not be construed as a representation that amounts in RMB were or may have been converted into HK$ using such exchange rate or any other exchange rate or at all. By Order of the Board Zhang Jingzhong Company Secretary Hangzhou, PRC, 23 August 2010 As at the date of this announcement, the executive directors of the Company are: Messrs. Chen Jisong, Zhan Xiaozhang, Jiang Wenyao and Zhang Jingzhong; the non-executive directors are: Messrs. Zhang Luyun and Zhang Yang; and the independent non-executive directors are: Messrs. Tung Chee Chen, Zhang Junsheng and Zhang Liping.
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