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ZHEH Zhejiang Expressway Co

92.1998
0.00 (0.00%)
28 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Zhejiang Expressway Co LSE:ZHEH London Ordinary Share CNE1000004S4 'H' CNY1
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.00% 92.1998 0.00 00:00:00
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
0 0 N/A 0

Zhejiang Expressway Disposal of 100% Equity Interest in Development Co

17/10/2016 3:27pm

UK Regulatory


 
TIDMZHEH 
 
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) 
 
                    DISCLOSEABLE AND CONNECTED TRANSACTION 
                IN RELATION TO DISPOSAL OF 100% EQUITY INTEREST 
                               IN DEVELOPMENT CO 
 
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. 
 
THE DISPOSAL 
 
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 is 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: 
 
(1)        approval of the Share Purchase Agreement by the Board; 
 
(2)        approval of the Share Purchase Agreement by the Independent 
Shareholders; 
 
(3)        approval of Share Purchase Agreement by the board of directors of 
Zhejiang Communications Investment; and 
 
(4)        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. 
 
2.  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 at 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. 
 
3. 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; 
  * All cash flow relating to business operation occurs at the same time with 
    the relevant incomes and expenses; 
  * During the toll period of Shanghai-Hangzhou-Ningbo expressway and 
    Shangyu-Sanmen expressway, Development Co always owns the right to manage 
    the service areas located in Jiaxing, Changan, Shaoxing, Yuyao, Shengzhou, 
    Xinchang and Tiantai, and will not be subject to additional expense or 
    income caused by the management right in the subsequent business operation; 
  * Main costs and expenses of Development Co's service areas have a stable 
    structure, and will not be subject to an increase or decrease that is 
    caused by transfer of shares. 
 
Deloitte, acting as the reporting accountants of the Company, has examined the 
calculations of the discounted future estimated cash flows in which the 
Valuation Report is based, which do not involve the adoption of accounting 
policies in its preparation. 
 
The Directors confirm that the valuation of 100% equity interest of Development 
Co in the Valuation Report, which constitutes a profit forecast under Rule 
14.61 of the Listing Rules, has been made after due and careful enquiry. 
 
A letter from Deloitte in compliance with Rule 14.62(2) of the Listing Rules 
and a letter from the Board in compliance with Rule 14.62(3) of the Listing 
Rules are included in the Appendices to this announcement. 
 
As at the date of this announcement, Deloitte (certified public accountants) 
does not have any shareholding, directly or indirectly, in any member of the 
Group or any right (whether legally enforceable or not) to subscribe for or 
to  nominate person to subscribe for securities in any member of the Group. 
 
To the best of the Directors' knowledge, information and belief, Deloitte is an 
Independent Third Party. 
 
Deloitte has given and has not withdrawn its written consent to the publication 
of this announcement with inclusion of its report and all references to its 
name in the form and context in which it is included. 
 
INFORMATION ON DEVELOPMENT CO 
 
Development Co is a limited liability company incorporated in the PRC on 28 May 
2003. Development Co is principally engaged in the operation of service areas 
as well as roadside advertising along the expressways operated by the Group. As 
of the date of this announcement, Development Co is a wholly-owned subsidiary 
of the Company and upon Completion, the Company will cease to hold any interest 
in Development Co and Development Co will cease to be a subsidiary of the 
Company. 
 
According  to  the  audited  financial  statements  of  Development  Co 
prepared  in accordance with generally accepted accounting principles in the 
PRC which was audited by the PRC statutory auditor of Development Co, the net 
asset value of Development Co as at 31 December 2015 was RMB362,861,274.05. A 
summary of the financial information of Development Co for the financial years 
ended 31 December 2014 and 2015 according to the PRC audited financial 
statements is set out below: 
 
                                                     As at 31 December 
 
                                                        2014      2015 
 
                                                     RMB'000   RMB'000 
                                                   (audited) (audited) 
 
Net profit before taxation and extraordinary items    84,134    67,349 
 
Net profit after taxation and extraordinary items     61,291    47,252 
 
TRANSACTIONS WITH DEVELOPMENT CO AND ITS SUBSIDIARIES AFTER COMPLETION 
 
Upon Completion, Development Co will be a wholly-owned subsidiary of 
Communications Group, so Development Co and its subsidiaries will become the 
connected persons of the Company upon Completion. As a result, should the 
Company enter into any new transactions or continue any existing transactions 
with Development Co and/or its subsidiaries after Completion, such transactions 
would constitute connected transactions or continuing connected transactions 
for the Company upon and following Completion. 
 
The Company is negotiating with Advertising Co  (a 70% owned subsidiary of 
Development Co) for an arrangement which would allow Advertising Co for the 
term of 3 years, to continue to use the land along the Shanghai-Hangzhou-Ningbo 
expressway and Shangsan expressway operated by the Company and its subsidiaries 
to conduct its advertising related business. 
 
The Company is also negotiating with Development Co for a leasing agreement 
which would allow Development Co to lease from the Company an office located in 
Hangzhou for the period of 3 years. 
 
The Company intends to enter into the above-mentioned agreements with 
Development Co or Advertising Co (as the case may be) upon Completion. Each of 
them will constitute a continuing connected transaction for the Company under 
Chapter 14A of the Listing Rules. It is expected that the highest applicable 
percentage ratios under the Listing Rules for these agreements (whether on a 
standalone basis or  in  aggregate) would be less than 0.1%, so each of them 
will be exempted from the reporting, announcement, annual review and 
independent shareholders' approval requirements under Chapter 14A of the 
Listing Rules. 
 
Further announcements will be made by the Company (if required) as and when 
appropriate in accordance with all application requirements of the Listing 
Rules. 
 
REASONS FOR AND BENEFITS OF THE DISPOSAL 
 
The Board considers that the Disposal will allow the Company to focus on the 
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. In addition, the 
Disposal allows the Company to realise its investment and recover its invested 
capital. Therefore, the Company entered into the Share Purchase 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 RMB67,300,000 from the Disposal. 
 
The Group intends to apply the sale proceeds as its general working capital. 
 
The  Directors  (excluding  the  members  of  the  Independent  Board 
Committee,  the opinion of which will be set out in the circular after taking 
into account the independent financial adviser's advice to be set out in the 
circular) consider that the Share Purchase Agreement is 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 TO THE SHARE PURCHASE AGREEMENT 
 
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, as well as 
securities related business. 
 
Zhejiang Communications Investment is a company incorporated in the PRC on 23 
October 2003, which is wholly-owned by Communications Group, the controlling 
shareholder of the Company. Zhejiang Communications Investment is principally 
engaged in investing in real estate and assets, catering service, automobile 
repair service, etc. 
 
LISTING RULES IMPLICATIONS 
 
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. 
 
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 Share Purchase 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 Share Purchase Agreement or is required to abstain from voting on 
the relevant Board resolutions to approve the same. 
 
GENERAL 
 
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. 
 
DEFINITIONS 
 
In this announcement, unless the context specifies otherwise, the 
following defined expressions have the following meanings: 
 
"Advertising    Zhejiang Expressway Advertising Co., Ltd. is a company 
Co"             incorporated in the PRC and a 70% owned subsidiary of 
                Development Co 
 
"associate(s)"  has the meaning ascribed to it under the Listing Rules 
 
"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 (Zhejiang Communications Investment Group Co., Ltd.), a wholly 
Group"          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, whose shares 
                are listed on the main board of the Stock Exchange 
 
"Completion"    completion of the Disposal pursuant to the Share Purchase 
                Agreement 
 
"connected      has the meaning ascribed to it under the Listing Rules 
person(s)" 
 
"controlling    has the meaning ascribed to it under the Listing Rules 
shareholder" 
 
"Deloitte"      Deloitte Touche Tohmatsu, the auditors of the Company 
 
"Development    Zhejiang Expressway Investment Development Co., L t d . 
Co"             a company incorporated in the PRC and a wholly - owned 
                subsidiary of the Company 
 
"Director(s)"   the director(s) of the Company 
 
"Disposal"      the disposal of 100% equity interest in Development Co by the 
                Company in accordance with the Share Purchase 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 
 
"Independent    an independent committee of the Board comprising all 
Board           independent non-executive Directors, namely, Mr. Zhou Jun, Mr. 
Committee"      Pei Ker-Wei and Ms. Lee Wai Tsang Rosa 
 
"Independent    Shareholders who are independent within the meaning of the 
Shareholders"   relevant provisions of the Listing Rules, and, in relation to 
                the approval of the Share Purchase 
                Agreement and the transactions contemplated thereunder at a 
                general meeting to be convened by the Company for such purpose, 
                means the Shareholders other than Communications Group and its 
                associates 
 
"Independent    a party independent and not connected with the Company, any of 
Third Party"    its subsidiaries or any of their respective directors or 
                substantial shareholders 
 
"Listing Rules" Rules Governing the Listing of Securities on The Hong Kong 
                Stock Exchange 
 
"percentage     has the meaning ascribed to it under Rule 14.04(9) of the 
ratio"          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 
 
"Shareholder(s) holder(s) of the share(s) of the Company 
" 
 
"Share Purchase the agreement dated 17 October 2016 entered into between the 
Agreement"      Company and Zhejiang Communications Investment, pursuant to 
                which the Company conditionally agreed to dispose of 100% 
                equity interest in Development Co to Zhejiang Communications 
                Investment 
 
"Stock          The Stock Exchange of Hong Kong Limited 
Exchange" 
 
"subsidiary     has the meaning ascribed to it under the Listing Rules 
(ies)" 
 
"Valuation      the valuation report dated 25 September 2016 prepared by the 
Report"         Valuer 
 
"Valuer"        Tian Yuan Appraisal Co., Ltd., the qualified independent valuer 
                appointed by the Company in respect of Development Co 
 
"Zhejiang       (Zhejiang Communications Investment Group Industrial 
Communications  Development Co., Ltd.*) a company incorporated in the PRC and a 
Investment"     wholly - owned subsidiary of Communications Group 
 
"%"             per cent. 
 
In this announcement, the translation of RMB into HK$ is based on the exchange 
of rate of HK$1 to RMB0.8552. Such conversion shall not be construed as a 
representation that amounts in RMB were or may have been converted into HK$ 
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, 17 October 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 
 
In compliance with Rule 14.60A of the Listing Rules, the text of each of the 
letters from Deloitte to the Directors confirming it has examined the 
calculations of the discounted future estimated cash flows for the Valuation 
Report, and the letter from the Board confirming that the Valuation Report has 
been made after due and careful enquiry, both dated 17 October 2016, for the 
purpose of, among other things, inclusion in this announcement are reproduced 
below: 
 
APPIX I -- LETTER FROM THE BOARD 
 
Listing Division 
The Stock Exchange of Hong Kong Limited 
11/F., One International Finance Centre, 
1 Harbour View Street, Central, 
Hong Kong 
17 October 2016 
 
Dear Sirs, 
 
Discloseable  and  Connected  Transaction  -  Disposal  of  100%  Equity 
Interest  in Development Co 
 
We refer to the valuation report dated 25 September 2016 (the "Valuation 
Report") and prepared  by  Tian  Yuan  Asset  Appraisal  Limited* ,  (the 
"Valuer") in relation to the valuation of 100% equity interest of Zhejiang 
Expressway Investment Development Co., Ltd. ("Development Co"), the  valuation 
of  which  constitutes  a  profit  forecast  under  Rule  14.61  of  the  Rules 
Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited. 
 
We have reviewed and discussed the bases and assumptions upon which the 
valuation of 100% equity interest of Development Co has been made with the 
Valuer, and reviewed the valuation for which the Valuer is responsible. We have 
also considered the report from, Deloitte Touche Tohmatsu, dated 17 October 
2016 regarding whether the discounted future estimated cash flows, so far as 
the calculations are concerned, have been properly compiled in accordance with 
the bases and assumptions set out in the Valuation Report. We have noted that 
the discounted future estimated cash flows do not involve the adoption of 
accounting policy. 
 
On the basis of the foregoing, we are of the opinion that the Valuation Report 
and the valuation therein prepared by the Valuer have been made after due and 
careful enquiry. 
 
                                                              Yours faithfully, 
                                                         On behalf of the Board 
                                                  ZHEJIANG EXPRESSWAY CO., LTD. 
                                                                     LUO Jianhu 
                                                             Executive Director 
 
APPIX II - LETTER FROM DELOITTE 
 
17 October 2016 
 
The Directors 
Zhejiang Expressway Co. Ltd. 
5/F, Block 2, Pearl International Business Center 
199 Wuxing Road 
Hangzhou City, Zhejiang Province PRC 310020 
 
INDEPENT ASSURANCE REPORT ON CALCULATION OF DISCOUNTED FUTURE ESTIMATED CASH 
FLOW SIN CONNECTION WITH THE VALUATION OF THE 100% EQUITY INTEREST IN ZHEJIANG 
EXPRESSWAY INVESTMENT DEVELOPMENT CO., LTD. ("DEVELOPMENT CO") 
 
TO THE DIRECTORS OF ZHEJIANG EXPRESSWAY  CO.,  LTD.  (THE "COMPANY") 
 
We have examined the calculation of the discounted future estimated cash flows 
on which the valuation prepared by Tian Yuan Asset Appraisal Limited  dated 25 
September  2016, in respect of the entire  equity  interest  in Development Co 
as at 31 July 2016 (the "Valuation") is based. Development Co is a company 
established in the People's Republic of China whose principal assets are the 
operational assets acquired for operation of service areas as well as roadside 
advertising along the expressways operated by the Company and its subsidiaries 
(the "Group"). The Valuation based on the discounted future estimated cash 
flows is regarded as a profit forecast under Rule 14.61 of the Rules Governing 
the Listing of Securities on The Stock Exchange of Hong Kong Limited (the 
"Listing Rules") and will be included in an announcement dated 17 October 2016 
to be issued by the Company in connection with the disposal of 100% equity 
interest in Development Co (the "Announcement"). 
 
Directors' responsibility for the discounted future estimated cash flows 
 
The directors of the Company are responsible for the preparation  of  the 
discounted future estimated cash flows in accordance with the bases and 
assumptions determined by the directors and set out in the section headed 
"Principal assumptions for the income approach adopted for the Valuation 
Report" of the Announcement (the "Assumptions"). This responsibility includes 
carrying out appropriate procedures relevant to the preparation of the 
discounted future estimated cash flows for the Valuation and applying an 
appropriate basis of preparation; and making estimates that are reasonable in 
the circumstances. 
 
Our Independence and Quality Control 
 
We have complied with the independence and other ethical requirements of the 
"Code of Ethics for Professional Accountants" issued by the Hong Kong Institute 
of Certified Public Accountants (the "HKICPA"), which is founded on fundamental 
principles of integrity, objectivity, professional competence and due care, 
confidentiality and professional behavior. 
 
Our firm applies Hong Kong Standard on Quality Control 1 "Quality Control for 
Firms that Perform Audits and Reviews of Financial Statements, and Other 
Assurance and Related Services Engagements" issued by the HKICPA and 
accordingly maintains a comprehensive system of quality control including 
documented policies and procedures regarding compliance with ethical 
requirements, professional standards and applicable legal and regulatory 
requirements. 
 
Reporting accountants' responsibility 
 
Our responsibility is to express an opinion on the arithmetical accuracy of the 
calculation of the discounted future estimated cash flows on which  the 
Valuation  is based and to report solely to you, as a body, as required by Rule 
14.62(2) of the Listing Rules, and for no other purpose. We do not assume 
responsibility towards or accept liability to any other person for the contents 
of this report. 
 
Our engagement was conducted in accordance with Hong Kong Standard on Assurance 
 
Engagements 3000 (Revised) "Assurance Engagements Other Than Audits or Reviews 
of Historical Financial Information" issued by the HKICPA. This standard 
requires that we comply with ethical requirements and plan and perform the 
assurance engagement to obtain reasonable assurance on whether the discounted 
future estimated cash flows, so far as the calculations are concerned, have 
been properly compiled in accordance with the Assumptions. Our work was limited 
primarily to making inquiries of the Company's management, considering the 
analyses and assumptions on which the discounted future estimated cash flows 
are based and checking the arithmetic accuracy of the compilation of the 
discounted future estimated cash flows. Our work does not constitute any 
valuation of Development Co. 
 
Because the Valuation relates to discounted future estimated cash flows, no 
accounting policies of the Company have been adopted in its preparation. The 
Assumptions include hypothetical assumptions about future events and management 
actions which cannot be confirmed and verified in the same way as past results 
and these may or may not occur. Even if the events and actions anticipated do 
occur, actual results are still likely to be different from the Valuation and 
the variation may be material. Accordingly, we have not reviewed, considered or 
conducted any work on the reasonableness and the validity of the Assumptions 
and do not express any opinion whatsoever thereon. 
 
Opinion 
 
Based on the foregoing, in our opinion, the discounted future estimated cash 
flows, so far as the  calculation is concerned,  have been properly compiled, 
in all material respects, in accordance with the Assumptions. 
 
Deloitte Touche Tohmatsu 
Certified Public Accountants 
Hong Kong 
 
 
 
 
 
 
 
 
 
END 
 

(END) Dow Jones Newswires

October 17, 2016 10:27 ET (14:27 GMT)

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