Circ re Discloseable Transaction
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
If you are in any doubt as to any aspect of this circular or as to the action
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professional adviser.
If you have sold all your shares in Zhejiang Expressway Co., Ltd., you should
at once pass this circular to the purchaser or to the bank, stockbroker or
other agent through whom the sale was effected for transmission to the
purchaser.
The Stock Exchange of Hong Kong Limited takes no responsibility for the
contents of this circular, makes no representation as to its accuracy or
completeness and expressly disclaims any liability whatsoever for any loss
howsoever arising from or in reliance upon the whole or any part of the
contents of this circular.
Zhejiang Expressway Co., Ltd.
(a joint stock limited company incorporated in the People's Republic of China
with limited liability)
(Stock Code: 0576)
DISCLOSEABLE TRANSACTION
FURTHER CAPITAL INJECTION INTO ZHESHANG SECURITIES
17 July, 2007
CONTENTS
Definitions
Letter from the Board
Appendix - General Information
DEFINITIONS
In this circular, unless the context otherwise requires, the following
expressions have the following meanings:
"Agreement" the agreement dated 6 June 2007 between Shangsan
Co and Zheshang Securities which governs the
Further Capital Injection;
"associate" has the same meaning given to it under the Listing
Rules;
"Company" Zhejiang Expressway Co., Ltd.;
"CSRC" China Securities Regulatory Commission;
"Development Co" Zhejiang Expressway Investment and Development
Co., Ltd., a 51% owned subsidiary of the Company;
"Directors" the directors of the Company;
"Further Capital Injection" the contribution by Shangsan Co of an amount of
RMB704,615,400 into the capital of Zheshang
Securities pursuant to the Agreement;
"Group" the Company and its subsidiaries;
"HK$" Hong Kong dollars, the lawful currency of the Hong
Kong Special Administrative Region;
"Independent Third Party/ Independent third party/parties not connected with
Parties" the directors, supervisors, substantial
shareholders of the Company or any of its
subsidiaries or their respective associates;
"Lanzhou Xinxing" Lanzhou Xinxing Heating Co., Ltd., a PRC
incorporated limited liability company;
"Latest Practicable Date" 13 July 2007, being the latest practicable date
prior to the printing of this circular for
ascertaining certain information for inclusion in
this circular;
"Lishui Hexin Investment" Lishui Hexin Investment Co., Ltd., a PRC
incorporated limited liability company;
"Listing Rules" the Rules Governing the Listing of Securities on
The Stock Exchange of Hong Kong Limited;
"PRC" the People´s Republic of China;
"RMB" renminbi, the lawful currency of the PRC;
"Shanghai Shanghai National Telecommunications Co., Ltd., a
Telecommunications" PRC incorporated limited liability company;
"Shanghai Transportation" Shanghai Jiao Yun Co., Ltd., a PRC incorporated
limited liability company;
"Shangsan Co" Zhejiang Shangsan Expressway Co., Ltd., a PRC
incorporated company and a subsidiary of the
Company;
"Shareholders" the shareholders of the Company;
"Taizhou State-Owned" Taizhou State-owned Assets Operations Co., Ltd. ,
a company solely owned by the PRC Government;
"Tonghe Investment" Tonghe Investment Holdings Co., Ltd., a PRC
incorporated limited liability company;
"Xizi United" Xizi United Holding Co., Ltd., a PRC incorporated
limited liability company;
"Yiwu Yuzhong Investment" Yiwu Yuzhong Investment Co., Ltd., a PRC
incorporated limited liability company;
"Zhejiang Hexin" Zhejiang Hexin Investment Management Co., Ltd., a
PRC incorporated limited liability company;
"Zhejiang Real Estate" Zhejiang Hexin Estate Co., Ltd., a PRC
incorporated limited liability company;
"Zhejiang Yulong" Zhejiang Yulong Industrial Co., Ltd., a PRC
incorporated limited liability company;
"Zhejiang Zhongyi" Zhejiang Zhongyi Group Co., Ltd., a PRC
incorporated limited liability company; and
"Zheshang Securities" Zheshang Securities Co., Ltd., a limited liability
company incorporated in the PRC in May 2002.
The Exchange rate used for reference purpose in this circular is HK$1.02 to
RMB1.00.
Letter From the Board
Zhejiang Expressway Co., Ltd.
(a joint stock limited company incorporated in the People's Republic of China
with limited liability)
(Stock Code: 0576)
Board of directors: Registered address:
12/F, Block A,
Executive directors: Dragon Century Plaza,
GENG Xiaoping 1 Hangda Road,
FANG Yunti Hangzhou, Zhejiang Province,
ZHANG Jingzhong 310007, The People's Republic
JIANG Wenyao of China
Non-executive directors:
ZHANG Luyun
ZHANG Yang
Independent non-executive directors:
TUNG Chee Chen
ZHANG Junsheng
ZHANG Liping
17 July 2007
To the Shareholders
Dear Sir and Madam,
DISCLOSEABLE TRANSACTION
FURTHER CAPITAL INJECTION INTO ZHESHANG SECURITIES
Introduction
It was announced by the Directors on 27 June 2007 that Shangsan Co, a
subsidiary of the Company, entered into the Agreement with Zheshang Securities
on 6 June 2007 pursuant to which Shangsan Co injected a further amount of
capital of RMB704,615,400 (approximately HK$718,707,700) into Zheshang
Securities by cash. Together with the initial injection of RMB600 million
(approximately HK$612 million) into the capital of Zheshang Securities,
Shangsan Co has contributed a total of approximately RMB1,305 million
(approximately HK$1,331 million) into the capital of Zheshang Securities. The
Further Capital Injection constitutes a discloseable transaction of the Company
under the Listing Rules.
Background
On 6 June 2007, Shangsan Co, a subsidiary of the Company, entered into the
Agreement with Zheshang Securities pursuant to which Shangsan Co injected a
further amount of capital of RMB704,615,400 (approximately HK$718,707,700) into
Zheshang Securities by cash. Together with an initial injection of RMB600
million (approximately HK$612 million) into the capital of Zheshang Securities,
Shangsan Co has contributed a total of approximately RMB1,305 million
(approximately HK$1,331 million) into the capital of Zheshang Securities.
In conjunction with the offer by Zheshang Securities to Shangsan Co to inject
additional capital into Zheshang Securities, Zheshang Securities also invited
other of its shareholders to inject additional capital into Zheshang Securities
in proportion to their respective equity interests in Zheshang Securities.
Immediately before the acceptance of the offers by Shanghai Telecommunications,
Shanghai Transportation and Zhejiang Real Estate (certain shareholders of
Zheshang Securities at the relevant time), each of them transferred their
remaining shareholding in Zheshang Securities to certain third parties which
are PRC incorporated companies, details of which are set out in the table below
titled "Change in shareholding of Zheshang Securities pursuant to the Further
Capital Injection and Equity Interest Transfers". These successors together
with other shareholders of Zheshang Securities, namely Shangsan Co, Tonghe
Investment and Taizhou State-Owned have taken up the offers and injected the
relevant amounts of capital into Zheshang Securities.
After the Further Capital Injection by Shangsan Co and the pro-rata capital
contribution by the other shareholders of Zheshang Securities, the registered
capital of Zheshang Securities increased from RMB520 million to RMB1,520
million and Shangsan Co continued to own as to 70.4615% of the capital of
Zheshang Securities. The remaining 29.5385% of the capital of Zheshang
Securities was owned by other shareholders, which, to the best of the Directors
´ knowledge, information and belief and after having made all reasonable
enquiry, are all Independent Third Parties.
Change in shareholding of Zheshang Securities pursuant to the Further Capital
Injection and equity interest transfers
Details of shareholding percentage of Zheshang Securities immediately before
and after the Further Capital Injection and equity interest transfers are as
follows:
Name of the equity holders Percentage of Percentage of
holding in the holding in the
equity capital equity capital
immediately prior immediately
to the Further after the
Capital Injection Further Capital
and equity Injection and
interest equity interest
transfers transfers
Shangsan Co 70.4615% 70.4615%
Tonghe Investment 4% 4%
Taizhou State-Owned 4% 4%
Shanghai Telecommunications 10% -
Shanghai Transportation 7.6924% -
Zhejiang Real Estate 3.8461% -
Yiwu Yuzhong Investment - 4.8%
Zhejiang Zhongyi - 2%
Lishui Hexin Investment - 3.2%
Xizi United - 3.8462%
Lanzhou Xinxing - 3.8462%
Zhejiang Yulong - 2.6923%
Zhejiang Hexin - 1.1538%
ï¼ï¼ï¼ï¼ï¼ï¼ï¼ ï¼ï¼ï¼ï¼ï¼ï¼ï¼
100% 100%
============= =============
Notes:
(1) Shanghai Telecommunications, before taking up the offer by Zheshang
Securities, transferred its remaining 10% equity interest in Zheshang
Securities to Yiwu Yuzhong Investment (4.8%), Zhejiang Zhongyi (2%) and Lishui
Hexin Investment (3.2%) respectively.
(2) Shanghai Transportation, before taking up the offer by Zheshang Securities,
transferred its remaining 7.6924% equity interest in Zheshang Securities to
Xizi United and Lanzhou Xinxing respectively in equal share.
(3) Zhejiang Real Estate, before taking up the offer by Zheshang Securities,
transferred its remaining 3.8461% equity interest in Zheshang Securities to
Zhejiang Yulong (2.6923%) and Zhejiang Hexin (1.1538%) respectively.
Funding
The Further Capital Injection was partially funded by internal resources of
Shangsan Co and internal financing arrangements of the Group. Details of
arrangements of the internal financing arrangements of the Group were set out
in an announcement of the Company dated 30 May 2007.
Effective Date of Further Capital Injection
The Further Capital Injection will be effective as and when approval thereof is
obtained from the CSRC. As at the Latest Practicable Date, approval has not
been obtained from the CSRC.
Impact of the Further Capital Injection
Pending approval of the Further Capital Injection, Shangsan Co has contributed
an aggregate amount of approximately RMB1,305 million (approximately HK$1,331
million) into the capital of Zheshang Securities. This corresponds to 70.4615%
of the equity interests in Zheshang Securities. The Company currently has a
73.625% shareholding in Shangsan Co, and therefore has an indirect interest of
51.877% in Zheshang Securities.
As Zheshang Securities is a subsidiary of Shangsan Co., which in turn is a
subsidiary of the Company, the Further Capital Injection will increase the
assets of the Group, but will not have a material impact on the earnings and
liabilities of the Group.
Based on the audited accounts of Zheshang Securities, the net assets of
Zheshang Securities amounted to approximately negative RMB188 million
(approximately negative HK$191 million) and approximately RMB779 million
(approximately HK$795 million) as at 31 December 2005 and 2006 respectively.
The audited profits after taxation and extraordinary items of Zheshang
Securities amounted to approximately negative RMB719 million (approximately
negative HK$733 million) for the year ended 31 December 2005. The audited
profits after taxation of Zheshang Securities amounted to approximately RMB203
million (approximately HK$207 million) for the year ended 31 December 2006.
Note: The accounts of Zheshang Securities for the year ended 31 December 2005
were prepared in accordance with accounting standards commonly accepted in the
PRC, whilst those for the year ended 31 December 2006 were prepared in
accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong
Institute of Certified Public Accountants.
Reasons of the Transaction
The Further Capital Injection will increase the net capital of Zheshang
Securities and, the Directors believe will set out a more solid foundation for
its involvement in more advanced trading activities, including but not limited
to the trading in share index futures.
By expanding the scope of business of Zheshang Securities, Zheshang Securities
will become more competitive in the capital market of the PRC.
Views of the Directors
The Directors (including the independent non-executive Directors), having
regard to the background of the Further Capital Injection as described above,
believe that the terms of the Agreement, which were determined after arm's
length negotiations, are fair and reasonable and in the interests of the
Company and the shareholders of the Company as a whole.
The Further Capital Injection contemplated under the Agreement constitutes a
discloseable transaction of the Company under the Listing Rules and is required
to be disclosed by way of the Company's announcement dated 27 June 2007 and
this circular.
Information of the Group, Shangsan Co and Zheshang Securities
The Company was incorporated on 1 March 1997 in the PRC and is a joint stock
limited company with a registered share capital of RMB4,343,114,500
(approximately HK$4,429,976,790) at present. The main business of the Group is
investment in, development, operation, management, and collection of tolls, of
the Shanghai-Hangzhou-Ningbo Expressway and the Shangsan Expressway, both in
the Zhejiang Province of the PRC, and businesses ancillary to the operation of
the expressways, such as billboard advertising and operation of service areas
on the expressways.
Apart from the 70.4615% shareholding interest in Zheshang Securities, Shangsan
Co owns and operates the Group´s business relating to collection of road tolls
in respect of the Shangsan Expressway.
Zheshang Securities is engaged in securities trading business, underwriting of
securities offering, investment advisory and other related activities as
authorized by the CSRC from time to time.
Additional Information
Your attention is drawn to the information set out in the Appendix to this
circular.
Yours faithfully,
By Order of the Board
ZHANG Jingzhong
Company Secretary
APPENDIX - GENERAL IMFORMATION
1. Responsibility statement
This circular includes particulars given in compliance with the Listing Rules
for the purpose of giving information with regard to the Company. The Directors
collectively and individually accept full responsibility for the accuracy of
the information contained in this circular and confirm, having made all
reasonable enquires, that to the best of their knowledge and belief there are
no other facts the omission of which would make any statement herein
misleading.
2. Directors' interests in securities
As at the Latest Practicable Date, the interests and short positions of the
Directors, Supervisors, and the chief executive in the shares, underlying
shares and debentures of the Company or any associated corporations (within the
meaning of the SFO) which were required to be notified to the Company and the
Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including
interests and short positions which they have taken on were deemed to have
under such provisions of the SFO), or which were required, pursuant to section
352 of the SFO, to be entered in the register referred to therein, or which
were required to be notified to the Company and the Stock Exchange pursuant to
the Model Code for Securities Transactions by Directors of Listed Companies
were as follows:
Name Position Contribution Nature of Percentage
of interest of
registered registered
capital of capital in
Development Development
Co Co
(RMB)
Mr. Geng Xiaoping Chairman 2,400,000 beneficially owned(1) 3.00%
Mr. Fang Yunti Director/Chief 1,920,000 beneficially owned(2) 2.40%
executive
Mr. Jiang Wenyao Director 1,320,000 beneficially owned(3) 1.65%
Mr. Zhang Director 1,100,000 beneficially owned(4) 1.38%
Jingzhong
Mr. Fang Zhexing Supervisor 700,000 beneficially owned(5) 0.88%
Notes:
(1) These interests in the registered capital of Development Co are held by Ms.
Huang Qiuxia as trustee for and on behalf of Mr. Geng Xiaoping pursuant to a
trust agreement dated 26th May, 2003.
(2) These interests in the registered capital of Development Co are held by Ms.
Huang Qiuxia as trustee for and on behalf of Mr. Fang Yunti pursuant to a trust
agreement dated 26th May, 2003.
(3) These interests in the registered capital of Development Co are held by Ms.
Huang Qiuxia as trustee for and on behalf of Mr. Jiang Wenyao pursuant to a
trust agreement dated 17th April, 2006.
(4) These interests in the registered capital of Development Co are held by Ms.
Huang Qiuxia as trustee for and on behalf of Mr. Zhang Jingzhong pursuant to a
trust agreement dated 14th September, 2005.
(5) These interests in the registered capital of Development Co are held by Ms.
Huang Qiuxia as trustee for and on behalf of Mr. Fang Zhexing pursuant to a
trust agreement dated 26th May, 2003.
Save as disclosed above, as at the Latest Practicable Date, none of the
Directors, the Supervisors and the chief executive and their respective
associates had any interests or short positions in the shares, underlying
shares and debentures of the Company or any associated corporations (within the
meaning of the SFO) which were required to be notified to the Company and the
Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including
interests and short positions which they have taken on were deemed to have
under such provisions of the SFO), or which were required, pursuant to section
352 of the SFO, to be entered in the register referred to therein, or which
were required to be notified to the Company and the Stock Exchange pursuant to
the Model Code for Securities Transactions by Directors of Listed Companies.
3. Substantial shareholders' interests in securities
As at the Latest Practicable Date, according to the register kept by the
Company pursuant to section 336 of the SFO and so far as the Directors were
aware, the following persons (not being a Director, Supervisor or chief
executive of the Company) had an interest or short position in the shares and
underlying shares of the Company which would fall to be disclosed to the
Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or who
was, directly or indirectly, interested in 10% or more of the nominal value of
any class of share capital carrying rights to vote in all circumstances at
general meetings of any member of the Group together with the number of shares
in which they were deemed to be interested:
Name Capacity Number of Percentage
shares held of share
capital
(domestic
shares)
Zhejiang Communications Investment Beneficial 2,432,500,000 83.61%
Group Co., Ltd. owner
Huajian Transportation Economic Beneficial 476,760,000 16.39%
Development Center owner
Name Capacity Number of Percentage
shares held of share
capital
(H shares)
Baillie Gifford & Co. Investment 214,093,200 14.93%
manager/ (long
interest of position)
controlled
corporations
Aberdeen Asset Management Plc and its Investment 185,290,170 12.92%
associates manager (long
position)
J.P. Morgan Chase & Co. Custodian 100,430,007 7.00%
corporation/ (long 6.68%
approved position)
lending agent/ 95,789,100
investment (lending
manager/ pool)
beneficial
owner
Mondrian Investment Partners Ltd. Investment 83,819,000 5.85%
manager (long
position)
The Bank of New York Mellon Corporation Interest of 78,465,160 5.47% 2.58%
controlled (long
corporations position)
36,945,560
(lending
pool)
Save as disclosed above, as at the Latest Practicable Date, there was no other
person (other than the interests of the Director, Supervisor or chief executive
of the Company), who had an interest or short position in the shares and
underlying shares and debentures of the Company which would fall to be
disclosed to the Company under the provisions of Division 2 and 3 of Part XV of
the SFO or who was, directly or indirectly, interested in 10% or more of the
nominal value of any class of share capital carrying rights to vote in all
circumstances at general meetings of any member of the Group.
4. Interest of Directors in substantial shareholders
Mr. Geng Xiaoping, an executive Director, is a director and general manager of
Zhejiang Communications Investment Group Co., Ltd. Ms. Zhang Luyun, a
non-executive Director, is a director and a deputy general manager of Zhejiang
Communications Investment Group Co., Ltd. Ms. Zhang Yang, a non-executive
Director, is a deputy general manager of Huajian Transportation Economic
Development Center.
5. Service contracts
As at the Latest Practicable Date, none of the Directors nor Supervisors has a
service contract with any member of the Group which is not determinable within
one year without payment of compensation (other than statutory compensation).
6. Interests in competing businesses
As at the Latest Practicable Date, none of the Directors or Supervisors (and
their respective associates) has any interest, and as far as each Director is
aware none of his associates has any interests, in any business which competes
or is likely to compete, either directly or indirectly, with the existing
business of the Group.
7. Litigation
So far as the Directors were aware, as at the Latest Practicable Date, no
litigation or claims of material importance are pending or threatened against
any member of the Group.
8. General
(a) The Secretary of the Company is Mr. Zhang Jingzhong, a PRC qualified
lawyer.
(b) As at the date hereof, the Company has not appointed any qualified
accountant as required under the Listing Rules. As announced on 20th January,
2006, the Company has obtained a conditional waiver in relation to compliance
with Rule 3.24 of the Listing Rules.
(c) The registered office of the Company is situated at 12/F, Block A, Dragon
Century Plaza, 1 Hangda Road, Hangzhou, Zhejiang, the PRC. The branch share
registrar of the Company in Hong Kong is Hong Kong Registrars Limited at Rooms
1806-1807,18/F, Hopewell Centre, 183 Queen's Road East, Hong Kong.
(d) The English language text of this document shall prevail over the Chinese
language text.
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