Inside Information Acquisition

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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)

INSIDE INFORMATION
ACQUISITION OF THE ENTIRE EQUITY INTEREST IN
HUANGSHAN YANGTSE HUIHANG EXPRESSWAY CO., LTD

This announcement is made by the Company pursuant to Rule 13.09(2) of the Listing Rules and the inside information provisions under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

The Board is pleased to announce that, on 19 August 2016, the Company entered into the Agreement with Huangshan Travel, pursuant to which (i) the Company agreed to acquire and Huangshan Travel agreed to dispose of the entire equity interest in Huihang Expressway at a consideration of RMB570 million payable in cash; and (ii) the Company agreed to provide a shareholders' loan to Huihang Expressway in the sum of RMB500 million within 10 days after completion of the registration of the transfer of the equity interest in Huihang Expressway with the Industry and Commerce Bureau for the repayment of a loan owed by Huihang Expressway to Huangshan Travel in the sum of RMB500 million.

As the applicable percentage ratios in respect of the Agreement do not exceed 5%, the Agreement and the transactions contemplated thereunder are not subject to mandatory disclosure and shareholders' approval requirements under the Listing Rules.

Completion of the Acquisition is subject to the satisfaction of certain conditions precedent, which may or may not proceed. Shareholders and investors of the Company are advised to exercise caution when dealing in the securities of the Company.

This announcement is made by Zhejiang Expressway Co., Ltd. (the "Company") pursuant to Rule 13.09(2) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited ("Listing Rules") and the inside information provisions under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

THE AGREEMENT

The board of directors (the "Board") of the Company is pleased to announce that, on 19 August  2016,  the  Company  entered  into  an  agreement  (the  "Agreement")  with Huangshan Travel Group Co., Ltd*, a company established in the People's Republic of China ("PRC") with limited liability ("Huangshan Travel"), pursuant to which (i) the Company agreed to acquire and Huangshan Travel agreed to dispose  of  the  entire  equity  interest  (the  "Sale  Interest")  in  Huangshan  Yangtse Huihang  Expressway  Co.,  Ltd*  ("Huihang Expressway") at a consideration of RMB570 million (the "Consideration") payable in cash (the "Acquisition"); and (ii) the Company agreed to provide a shareholders' loan to Huihang Expressway in the sum of RMB500 million within 10 days after completion of the registration of the transfer of the Sale Interest with the Industry and Commerce Bureau for the repayment of a loan owed by Huihang Expressway to Huangshan Travel in the sum of RMB500 million.

The Consideration and basis of determination

The Consideration is the price, being the minimum asking price, at which the Company bid  and  succeeded  at  an  open  auction  for  the  Sale  Interest  by  the  Anhui  Asset  and Equity Exchange* ("AAEE"). Prior to the auction, arm's length negotiations between the Company and Huangshan Travel had taken place in respect of the transfer of the Sale Interest.

In determining whether or not to participate in the aforesaid auction, the Company has taken into account, among other factors, the valuation of Huihang Expressway conducted by an independent valuer commissioned by the Company. The Consideration is lower than the value of Huihang Expressway as determined by the  independent valuer.

The Consideration shall be satisfied by the Company by instalments in the following manner:

1.             On 5 August 2016, as a condition to the Company participating in the auction, RMB171 million was paid by the Company to AAEE as a deposit (the "Deposit"). AAEE shall release the Deposit to Huangshan Travel within two business days of the effective date of the Agreement as the first instalment of the Consideration;

2.             The second instalment of RMB370.5 million (the "Second Instalment") will be payable by the Company to AAEE within 10 business days of the approval of the Acquisition by the relevant department of the  Transport  Department  of  Anhui Province and completion of the transfer of the  Sale  Interest.  The  Second Instalment will be released by AAEE to Huangshan Travel within two business days of its receipt of the same.

3.             The third instalment RMB28.5 million (the "Third Instalment") will be payable by the Company to AAEE within six months of the payment of the Second Instalment. The Third Instalment will be released by AAEE to Huangshan Travel within two business days of its receipt of the same.

Conditions precedent

The Agreement shall take effect upon satisfaction of the following conditions:

1.             The transactions contemplated under the Agreement having been approved by the respective board of directors of Huangshan Travel and the Company;

2.             The transactions contemplated under the Agreement having been approved by the board of directors of Zhejiang Communications Investment Group Co., Ltd., being the controlling shareholder of the Company;

3.             The transactions contemplated under the Agreement having been approved by the relevant regulatory authorities; and

4.             The parties to the Agreement having confirmed the contractual obligations and liabilities of Huihang Expressway as at 31 July 2016, as reviewed by the auditors appointed by the Company for the purposes of the Acquisition.

Within 20 days of the issue of a certificate by the EEAA confirming the release of the Deposit to Huangshan Travel, the Company and Huangshan Travel shall register the transfer of the shares in Huihang Expressway with the Industry and Commerce Bureau.

Other terms of the Agreement

Pursuant to the Agreement, for a period of four years following the completion of the Acquisition, the Company undertakes that Huihang Expressway will commit not less than RMB100 million for the maintenance of the Anhui section of the Huihang Expressway.

A framework agreement (the "Framework Agreement") was entered into between Huihang Expressway and the Anhui Huangshan branch of Sinopec in June 2003 in relation to the development and operation of service stations on the Anhui section of the Huihang Expressway. A minutes of the general manager's office number 15 of 2016 issued  by  the  Anhui  branch  of  Sinopec  has  expressly  stated  Sinopec's  intention  to expand the service station in Zhu Village and agreed to enter into a supplemental agreement to the Framework Agreement, pursuant to which the Anhui Province branch of Sinopec will be responsible for any construction costs for the expansion of the Zhu Village service station as well as being entitled to the revenue from its operation. Huangshan Travel has undertaken to use its best effort to procure the entering into of the supplemental agreement to the Framework Agreement between Huihang Expressway and the Anhui Province branch of Sinopec.

Termination of the Agreement

The Agreement may be terminated on the following circumstances:

1.             Either party to the Agreement having committed a material breach of the Agreement, which renders the transactions contemplated under the Agreement not being able to complete;

2.             The transactions contemplated under the Agreement not having been approved by the relevant State-owned Assets Supervision and Administration authority;

3.             The parties to the Agreement having agreed to terminate the Agreement; or

4.             The termination of the Agreement is requested by the relevant authorities on the basis that the Agreement is against the law or policies of the state.

Information on Huihang Expressway

Huihang Expressway is a company established in the PRC with limited liability, the principal business of which is the operation and management of the Anhui section of the Huihang Expressway in Zhejiang Province, the PRC. The Anhui section of the Huihang Expressway is a four-lane expressway with a total length of approximately 81.62km,  which  is  connected  with  the  Zhejiang  section  of  the  Hangzhou-Ruili Expressway (G56) operated by Zhejiang Hanghui Expressway Co., Ltd.*, a subsidiary of the Company.

According to the audited accounts of Huihang Expressway as at 29 February 2016, the total assets and net assets of Huihang Expressway were approximately RMB1.8 billion and RMB111 million, respectively, together with an accumulated loss of approximately RMB1 billion. Huihang Expressway recorded a revenue of approximately RMB152 million and a loss of approximately RMB23 million for the year ended 31 December 2015.

Upon completion of the Acquisition, Huihang Expressway will become a wholly-owned subsidiary of the Company. Accordingly, the accounts of Huihang Expressway will be consolidated into the accounts of the Company.

To the best of the knowledge, information and belief of the directors of the Company having made all reasonable enquiry, Huangshan Travel and its ultimate beneficial owner are not connected persons of the Company.

The Company is principally engaged in investing in, developing and operating high- grade roads in the PRC. The Acquisition represents a good opportunity for the Company to further develop its business and increase its market share and competitive strength in the Zhejiang Province and the adjacent areas. In addition, given that the Anhui section of the Huihang Expressway is already in operation and connected with the Zhejiang section of the Hangzhou-Ruili Expressway operated by the Company, the Acquisition is expected to create synergy effect in the management and operation of the two expressways. Accordingly, the Board considers that the terms of the Acquisition are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

As the applicable percentage ratios in respect of the Agreement do not exceed 5%, the Agreement and the transactions contemplated thereunder are not subject to mandatory disclosure and shareholders' approval requirements under the Listing Rules.

Completion of the Acquisition is subject to the satisfaction of certain conditions precedent, which may or may not proceed. Shareholders and investors of the Company are advised to exercise caution when dealing in the securities of the Company.

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

Hangzhou, PRC, 19 August 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.

*    English names for reference only