ZHEH.L Regulatory News (ZHEH)

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of HongKong Limited take no responsibility for the contents of this announcement,make no representation as to its accuracy or completeness and expresslydisclaim any liability whatsoever for any loss howsoever arising from orin 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) CONTINUING CONNECTED TRANSACTIONS IN RELATION TO A NEW FINANCIAL SERVICES AGREEMENT WITH ZHEJIANG COMMUNICATIONS INVESTMENT GROUP FINANCE CO., LTD. CONTINUING CONNECTED TRANSACTIONS Reference is made to the announcements of the Company dated July 19, 2013and March 28, 2014 relating the Existing Financial Services Agreement inrelation to, among others, the provision of Deposit Services, Loan andFinancial Leasing Services, Clearing Services and the Other FinancialServices by Zhejiang Communications Finance to the Group. It is currently expected by the Company that the existing annual capfor the Deposit Services will be insufficient to satisfy the Group'sfuture needs. As such, on April 24, 2015 the Company entered into theNew Financial Services Agreement with Zhejiang Communications Financeto, among others, increase the annual cap for the Deposit Services. LISTING RULES IMPLICATIONS As at the date of this announcement, Communications Group holdsapproximately 67% of the issued share capital of the Company. By virtueof this shareholding interest, Communications Group is a substantialshareholder (as defined under the Listing Rules) of the Company.As at the date of this announcement, Zhejiang Communications Finance isowned as to 35%, 40%, 15.625% and 9.375% by the Company, Communications Group,Ningbo Expressway Co. and Taizhou Expressway Co. respectively. Therefore,Zhejiang Communications Finance is a connected person of the Companyand as a result, each of the Deposit Services, the Loan and FinancialLeasing Services, the Clearing Services and the Other Financial Servicescontemplated under the New Financial Services Agreement constitutes acontinuing connected transaction for the Company under Chapter 14Aof the Listing Rules. As one or more of the applicable percentageratios in respect of the annual cap for Deposit Services under theNew Financial Services Agreement is more than 5%, the Deposit Serviceswill constitute continuing connected transactions of the Company underChapter 14A of the Listing Rules subject to the reporting, announcementand Independent Shareholders' approval requirements under Chapter 14Aof the Listing Rules. In view of the interest of Communications Group in the New FinancialServices Agreements, Communications Group and its associates will abstainfrom voting at the AGM to be convened by the Company to, among others,consider and approve the resolutions in relation to the New FinancialServices Agreements and the transactions contemplated thereunder. GENERAL The Company will put forward, among other things, ordinary resolutionsto approve the New Financial Services Agreement, at the AGM to be convenedby the Company for the Independent Shareholders' consideration and approval. An Independent Board Committee has been formed to consider the DepositServices under the New Financial Services Agreement, and Bridge Partnershas been appointed as the Company's Independent Financial Adviser to advisethe Independent Board Committee and the Independent Shareholders inrespect of the Deposit Services under the New Financial Services Agreement. A circular containing, among other things, (i) details of the New FinancialServices Agreement, (ii) a letter from the Independent Board Committee tothe Independent Shareholders in respect of the Deposit Services under theNew Financial Services Agreement, (iii) a letter of advice from the IndependentFinancial Adviser to the Independent Board Committee and the IndependentShareholders in respect of the Deposit Services under the New FinancialServices Agreement, and (iv) a notice of AGM, is expected to be dispatchedto the Shareholders on or before May 15, 2015. CONTINUING CONNECTED TRANSACTIONS Reference is made to the announcements of the Company dated July 19, 2013and March 28, 2014 relating the Existing Financial Services Agreement inrelation to, among others, the provision of Deposit Services, Loan and FinancialLeasing Services, Clearing Services and the Other Financial Services byZhejiang Communications Finance to the Group. It is currently expected by the Company that the existing annual cap forthe Deposit Services will be insufficient to satisfy the Group's future needs.As such, on April 24, 2015 the Company entered into the New Financial ServicesAgreement with Zhejiang Communications Finance to, among others, increase theannual cap for the Deposit Services. The principal terms of the New FinancialServices Agreement are set out below: Date: April 24, 2015 Term: Three years from the date when the New Financial Services Agreement comes into effect. Parties: (1) The Company (2) Zhejiang Communications Finance Condition precedent: The New Financial Services Agreement is conditional upon the resolution(s) regarding the New Financial Services Agreement (including the proposed annual cap for the Deposit Services) and the transactions contemplated thereunder being approved by the Independent Shareholders at the AGM. Termination of: Once the New Financial Services Agreement comesExisting Financial into effect, it will supersede the Existing FinancialServices Agreement Services Agreement and the Existing Financial Services Agreement will be deemed to have been mutually terminated by the parties and each of the parties shall have no claim against the other in respect of the early termination of the Existing Financial Services Agreement. However, the entering into of the New Financial Services Agreement and the termination of the Existing Financial Services Agreement shall not otherwise affect any payment obligations incurred but not yet satisfied under the Existing Financial Services Agreement. Principal services: Pursuant to the New Financial Services Agreement, theto be provided services to be provided by Zhejiang Communications Finance to the Group include the Deposit Services, the Loan and Financial Leasing Services, the Clearing Services and the Other Financial Services. In respect of the provision of the Deposit Services, Zhejiang Communications Finance may provide current deposit, time deposit, call deposit or agreement deposit services to the Group, subject to a daily cap on the aggregate deposit amount of RMB2,500,000,000. In respect of the provision of the Loan and Financial Leasing Services, Zhejiang Communications Finance will grant integrated credit facilities to the Group. In respect of the provision of the Clearing Services under the New Financial Services Agreement, Zhejiang Communications Finance will provide clearing services to the Group in connection with the making and receiving of payments and related ancillary services. In respect of the provision of the Other Financial Services under the New Financial Services Agreement, Zhejiang Communications Finance will provide such services within the permitted business scope of Zhejiang Communications Finance as approved by CBRC. The Company and Zhejiang Communications Finance will enter into separate agreement(s) for the relevant Other Financial Services actually provided, and such separate agreement(s) must comply with the principles and terms set out in the New Financial Services Agreement and applicable laws. Zhejiang Communications Finance should also actively explore with the CBRC the possibility of expanding the business scope of its license, so as to enable it to improve and increase the types of financial services that it is currently providing to the Group. The parties to the New Financial Services Agreement further agree to enter into separate agreements for the relevant financial services actually provided under the New Financial Services Agreement and the terms of such agreements shall be based on the New Financial Services Agreement and shall be in compliance with the terms stipulated therein in all material aspects. Basis of consideration: Deposit Services The interest rate to be paid by Zhejiang Communications Finance for the Group's deposits with Zhejiang Communications Finance shall be determined based on the prevailing deposit interest rate promulgated by the People's Bank of China for the same period and should not be lower than the deposit interest rates offered by major commercial banks in the PRC for comparable deposits of comparable periods. Loan and Financial Leasing Services The interest rate to be charged by Zhejiang Communications Finance for loans granted to the Group by Zhejiang Communications Finance shall be based on the prevailing bank lending interest rate promulgated by the People's Bank of China for the same period and should not be higher than the interest rates charged by major commercial banks in the PRC for comparable loans of comparable periods. Clearing Services The service fee to be charged by Zhejiang Communications Finance for the Clearing Services to be provided by Zhejiang Communications Finance to the Group shall be agreed between the parties and should not be higher than the service fees charged by other financial institutions (being independent third parties) for comparable services in the PRC. Other Financial Services The service fee to be charged by Zhejiang Communications Finance for the Other Financial Services to be provided by Zhejiang Communications Finance to the Group shall be agreed between the parties and should not be higher than the service fees charged by other financial institutions (being independent third parties) for comparable services in the PRC. Governing Law: The laws of the PRC HISTORICAL TRANSACTION AMOUNTS The historical amounts for the Deposit Services under the Existing Financial ServicesAgreement are as follows: Maximum daily outstanding balance of deposit for the Maximum daily period from the date of the outstanding Existing Financial balance of deposit Services Agreement for the year ended to December 31, 2013 December 31, 2014 (RMB'000) (RMB'000) 345,453 627,870 The historical amounts for the Loan and Financial Leasing Services under theExisting Financial Services Agreement are as follows: Maximum daily outstanding Maximum daily balance of loans for the period outstanding from the date of the Existing balance of loans Financial Services Agreement for the year ended to December 31, 2013 December 31, 2014 (RMB'000) (RMB'000) 340,000 0 The historical amounts for the Clearing Services under the ExistingFinancial Services Agreement are as follows: Aggregate fees paid for the period from the date Aggregate fees paid of the Existing Financial Services for the year ended Agreement to December 31, 2013 December 31, 2014 (RMB'000) (RMB'000) 0 0 The historical amounts for the Other Financial Services under the ExistingFinancial Services Agreement are as follows: for the period from the date Aggregate fees paid Aggregate fees paid for the period from the date of the Existing Aggregate fees paid Financial Services Agreement for the year ended to December 31, 2013 December 31, 2014 (RMB'000) (RMB'000) 0 0 PROPOSED ANNUAL CAP AND BASIS OF DETERMINATION FOR ANNUAL CAP a. Deposit Services Pursuant to the New Financial Services Agreement, it is proposed that the annualcap for the maximum daily aggregate outstanding balance of deposits be increased fromRMB700,000,000 to RMB2,500,000,000. The proposed annual cap was determined after takinginto account of the size of the total assets of the Group and the anticipated dailyoutstanding balance of deposits of the Group. In particular, the Company notesthat the maximum daily deposit balance during 2014 was RMB627,870,000. b. Loan and Financial Leasing Services The maximum daily aggregate outstanding balance of loans to be provided is proposedto be RMB2,500,000,000. The annual cap for the Loan and Financial Leasing Servicesis determined with reference to (i) the amount of the borrowings of the Group forthe period from the date of the Existing Financial Services Agreement to December31, 2013 and the year ended December 31, 2014; and (ii) the expected new borrowingsof the Group for the three years ending December 31, 2017 and with a view tomanaging its financial risks effectively and reasonably. c. Clearing Services Based on the aggregate amount of fees paid for Clearing Services under theExisting Financial Services Agreement for the period from the date of theExisting Financial Services Agreement to December 31, 2013 and the year endedDecember 31, 2014, the Company expects that each of the applicable percentageratios of the total fees payable by the Group to Zhejiang Communications Financeunder the Clearing Services will fall within the de minimis threshold as stipulatedunder Rule 14A.76 of the Listing Rules. d. Other Financial Services Based on the aggregate amount of fees paid for Other Financial Services underthe Existing Financial Services Agreement for the period from the date of theExisting Financial Services Agreement to December 31, 2013 and the year endedDecember 31, 2014, the Company expects that each of the applicable percentageratios of the total fees payable by the Group to Zhejiang CommunicationsFinance under the Other financial Services will fall within the de minimisthreshold as stipulated under Rule 14A.76 of the Listing Rules. The Companyconfirms that there will be no provision of financial assistance by the Groupto Zhejiang Communications Finance under the New Financial Services Agreement. REASONS FOR AND BENEFITS FOR ENTERING INTO THE NEW FINANCIAL SERVICES AGREEMENT As disclosed in the announcement of the Company dated March 30, 2013, theCompany has contributed an amount of RMB280,000,000, by way of cash, intothe equity capital of Zhejiang Communications Finance. Following the completionof the Capital Contribution, Zhejiang Communications Finance has become anassociate of the Company. With the New Financial Services Agreement, theCompany expects to derive synergy from utilising services provided by ZhejiangCommunications Finance through the ordinary and usual course of business of bothcompanies. The parties entered into the New Financial Services Agreement toamend certain terms under the Existing Financial Services Agreement, in orderthat the Company may better utilise the platform of Zhejiang CommunicationsFinance in relation to financial matters, deepen the Company's cooperation withZhejiang Communications Finance, increase the Company's capital investment andreduce its financing costs and risks. Any deposits with Zhejiang CommunicationsFinance will be placed by the Company on an as-needed basis, and will not haveany adverse impact on the Company's future business developments (including,but not limited to, the Company's ability to acquire suitable expressway assetsin the future, when and if such opportunities arise). Taking into account of the above, the Directors (the independent non-executiveDirectors will express their opinions to the Independent Shareholders afterconsidering the advice from the Independent Financial Adviser in respect ofthe Deposit Services under the New Financial Services Agreement) considerthat the New Financial Services Agreement, including the annual cap for theDeposit Services, the Loan and Financial Leasing Services, the ClearingServices and the Other Financial Services, are fair and reasonable and onnormal commercial terms in the ordinary course of business of the Company,and are in the interests of the Company and the Shareholders as a whole. As Mr. Zhan Xiaozhang, Mr. Wang Dongjie, Mr. Dai Benmeng and Mr. Zhou Jianpingare all Directors of the Company and employees of the Communications Group,they have abstained from voting at the board meeting at which the NewFinancial Services Agreement was considered and approved. INFORMATION ON ZHEJIANG COMMUNICATIONS FINANCE Zhejiang Communications Finance is a limited liability company incorporatedin the PRC on November 9, 2012 and approved by CBRC as a non-banking financialinstitution on October 17, 2012 with a registered capital of RMB500 million.As at the date of this announcement, Zhejiang Communications Finance is ownedas to 35%, 40%, 15.625% and 9.375% by the Company, Communications Group,Ningbo Expressway Co. and Taizhou Expressway Co. respectively. Zhejiang Communications Finance is principally engaged in the business ofproviding financial services to the subsidiaries of Communications Group,including but not limited to advising the subsidiaries of the CommunicationsGroup in relation to financing, letters of credit and other agency services;authorised insurance businesses; providing guarantees, accepting and discountingcommercial notes, arranging for loans and financial leases, and receivingdeposits from the subsidiaries of the Communications Group. INFORMATION ON THE COMPANY The Company is a joint stock limited company established under the lawsof the PRC with limited liability on March 1, 1997, the H Shares of which arelisted on the Main Board of the Stock Exchange. It is principally engagedin investing in, developing and operating high-grade roads in the PRC.The Group also carries on certain other businesses such as automobile servicing,operation of gas stations and billboard advertising along expressways, as wellas securities related business. LISTING RULES IMPLICATIONS As at the date of this announcement, Communications Group holds approximately67% of the issued share capital of the Company. By virtue of this shareholdinginterest, Communications Group is a substantial shareholder (as defined underthe Listing Rules) of the Company. As at the date of this announcement,Zhejiang Communications Finance is owned as to 35%, 40%, 15.625% and 9.375% by theCompany, Communications Group, Ningbo Expressway Co. and Taizhou ExpresswayCo. respectively. Therefore, Zhejiang Communications Finance is a connected personof the Company and as a result, each of the Deposit Services, the Loan andFinancial Leasing Services, the Clearing Services and the Other Financial Servicescontemplated under the New Financial Services Agreement constitutes a continuingconnected transaction for the Company under Chapter 14A of the Listing Rules. As one or more of the applicable percentage ratios (other than the profitsratio) in respect of the Deposit Services under the New Financial ServicesAgreement is more than 5%, the Deposit Services will constitute continuingconnected transactions of the Company under Chapter 14A of the ListingRules subject to the reporting, announcement and independent shareholders'approval requirements under Chapter 14A of the Listing Rules. CommunicationsGroup and its associates will abstain from voting on the resolutions in respectof the Deposit Services under the New Financial Services Agreement and the annualcap for the Deposit Services at the AGM. The Loan and Financial Leasing Services under the New Financial ServicesAgreement will constitute financial assistance provided by a connected person.As such loan services will be provided on normal commercial terms or on termswhich are more favorable to the Group and will not be secured by the assets ofthe Group, the Loan and Financial Leasing Services under the New FinancialServices Agreement are exempt from announcement, reporting, annual review andindependent shareholders' approval requirements under Chapter 14A of the Listing Rules. The Company expects that each of the applicable percentage ratios of the total feespayable by the Company to Zhejiang Communications Finance under each of theClearing Services and the Other Financial Services will fall within the deminimis threshold as stipulated under Rule 14A.76 of the Listing Rules.As such, each of the Clearing Services and the Other Financial Services isexempt from announcement, reporting, annual review and independent shareholders'approval requirements under Chapter 14A of the Listing Rules. The Company willcomply with the reporting, announcement and independent shareholders' approvalrequirements of the Listing Rules in the event that the transaction amount ofthe Clearing Services or the Other Financial Services to be provided by ZhejiangCommunications Finance to the Company under the New Financial Services Agreementis expected to exceed the relevant threshold. The Group will be closely monitoring the deposit amounts under the DepositServices to ensure that the existing annual cap is not exceeded beforeobtaining the approval from the Independent Shareholders in respect of theannual cap for the Deposit Services under the New Financial ServicesAgreement at the AGM. Subject to obtaining approval by Independent Shareholders at the AGM, the NewFinancial Services Agreement will come into effect and the Existing FinancialServices Agreement will be terminated. A separate announcement will be made bythe Company when the New Financial Services Agreement comes into effect andthe Existing Financial Services Agreement is terminated in accordance withthe Listing Rules. GENERAL The Company will put forward, among other things, ordinary resolutions toapprove the New Financial Services Agreement, at the AGM to be convened by theCompany for the Independent Shareholders' consideration and approval. An Independent Board Committee comprising all the independent non-executiveDirectors, namely, Mr. Zhou Jun, Mr. Pei Ker-Wei and Ms. Lee WaiTsang Rosa, has been formed to consider the Deposit Services under the NewFinancial Services Agreement, and Bridge Partners has been appointed asthe Company's Independent Financial Adviser to advise the Independent BoardCommittee and the Independent Shareholders in respect of the Deposit Servicesunder the New Financial Services Agreement. A circular containing, among other things, (i) details of the New FinancialServices Agreement, (ii) a letter from the Independent Board Committee tothe Independent Shareholders in respect of the Deposit Services under theNew Financial Services Agreement, (iii) a letter of advice from theIndependent Financial Adviser to the Independent Board Committee andthe Independent Shareholders in respect of the Deposit Services underthe New Financial Services Agreement, and (iv) a notice of AGM, isexpected to be dispatched to the Shareholders on or before May 15, 2015. DEFINITIONS In this announcement, unless the context specifies otherwise,the following defined expressions have the following meanings: "%" per cent. "AGM" the 2014 annual general meeting of the Shareholders of the Company to be convened for the purposes of, among other things, the approval by the Independent Shareholders of the New Financial Services Agreement "annual cap" has the meaning ascribed to it under Rule 14A.53 of the Listing Rules "Articles of Association" the articles of association of the Company "associate(s)" has the meaning ascribed to it under the Listing Rules "Board" the board of Directors "Bridge Partners" or Bridge Partners Capital Limited, a licensed corporation"Independent Financial licensed to conduct type 1 (dealing in securities)Adviser" and type 6 (advising on corporate finance) regulated activities under the SFO and the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Deposit Services under the New Financial Services Agreement "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 "Capital Contribution" the capital contribution by the Company in the amount of RMB280,000,000, by way of cash, into the equity capital of Zhejiang Communications Finance pursuant to a capital contribution agreement dated March 30, 2013 entered into between the Company, Zhejiang Communications Finance, Communications Group, Ningbo Expressway Co. and Taizhou Expressway Co., the details of which are contained in the announcement of the Company dated March 30, 2013 "CBRC" China Banking Regulatory Commission of the PRC "Clearing Services" the clearing services provided or proposed to be provided by Zhejiang Communications Finance to the Company pursuant to the Existing Financial Services Agreement or (as the case may be) the New Financial Services Agreement as described under the section headed "Continuing Connected Transactions - Principal services to be provided" in this announcement "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" or "Zhejiang Zhejiang Expressway Co., Ltd., a joint stockExpressway" limited company incorporated in the PRC with limited liability "connected person(s)" has the meaning ascribed to it under the Listing Rules "continuing connected has the meaning ascribed to it in the Listing RulesTransaction" "controlling shareholder" has the meaning ascribed to it under the Listing Rules "Deposit Services" the cash deposit services provided or proposed to be provided by Zhejiang Communications Finance to the Company pursuant to the Existing Financial Services Agreement or (as the case may be) the New Financial Services Agreement as described under the section headed "Continuing Connected Transactions - Principal services to be provided" in this announcement "Directors" the directors of the Company "Existing Financial the financial services agreement dated July 18, 2013Services Agreement" entered into between the Company and Zhejiang Communications Finance (as supplemented by a supplemental agreement dated March 28, 2014), pursuant to which Zhejiang Communications Finance agreed to provide the Group with the Deposit Services, the Loan and Financial Leasing Services, the Clearing Services and the Other Financial Services, subject to the terms and conditions provided therein "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 "Independent Board an independent committee of the Board comprisingCommittee" all independent non-executive Directors, namely, Mr. Zhou Jun, Mr. Pei Ker-Wei and Ms. Lee Wai Tsang Rosa "Independent Shareholders" Shareholders who are independent within the meaning of the relevant provisions of the Listing Rules, and, in relation to the approval of the New Financial Services Agreement at the AGM, means the Shareholders other than Communications Group and its associates "Independent Third Party" a party independent and not connected with the Company, any of its subsidiaries or any of their respective Directors or substantial shareholders "Listing Rules" Rules Governing the Listing of Securities on the Stock Exchange "Loan and Financial the loan and financial leasing services provided orLeasing Services" proposed to be provided by Zhejiang Communications Finance to the Company pursuant to the Existing Financial Services Agreement or (as the case may be) the New Financial Services Agreement as described under the section headed "Continuing Connected Transactions - Principal services to be provided" in this announcement "New Financial Services the new financial services agreement dated AprilAgreement" 24, 2015 entered into between the Company and Zhejiang Communications Finance as described in this announcement "Ningbo Expressway Co." (Zhejiang Ningbo Yongtaiwen Expressway Co., Ltd.), a limited liability company incorporated in the PRC and a 75% owned subsidiary of Communications Group "Other Financial Services" the financial services (other than the Deposit Services, Loan and Financial Leasing Services and Clearing Services) provided or proposed to be provided by Zhejiang Communications Finance to the Company pursuant to the Existing Financial Services Agreement or (as the case may be) the New Financial Services Agreement as described under the section headed "Continuing Connected Transactions - Principal services to be provided" in this announcement "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 "SFO" Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) "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 "Taizhou Expressway Co." (Zhejiang Taizhou Yongtaiwen Expressway Co., Ltd.), a limited liability company incorporated in the PRC and a 75% owned subsidiary of the Communications Group "Zhejiang Communications (Zhejiang Communications Investment GroupFinance" Finance Co., Ltd.), a limited liability company incorporated in the PRC , which is owned as to 35%, 40%, 15.625% and 9.375% by the Company, Communications Group, Ningbo Expressway Co. and Taizhou Expressway Co. respectively On behalf of the Board ZHEJIANG EXPRESSWAY CO., LTD. ZHAN Xiaozhang Chairman Hangzhou, the PRC, April 24, 2015 As at the date of this announcement, the executive directors of the Company are:Mr. ZHAN Xiaozhang, Ms. LUO Jianhu and Mr. DING Huikang; the non-executive directorsof 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.