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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)
CONTINUING CONNECTED TRANSACTIONS IN RELATION TO NEW
FINANCIAL SERVICES AGREEMENT WITH ZHEJIANG COMMUNICATIONS INVESTMENT GROUP FINANCE CO., LTD.
NEW FINANCIAL SERVICES AGREEMENT
Reference is made to the announcements of the Company dated July 19, 2013 and March 28, 2014 relating to the Existing Financial Services Agreement in relation to, among others, the provision of Deposit Services, Loan and Financial Leasing Services, Clearing Services and the Other Financial Services by Zhejiang Communications Finance to the Group.
It is currently expected by the Company that the existing annual cap for the Deposit Services will be insufficient to satisfy the Group's future needs. As such, on March 30, 2016, the Company entered into the New Financial Services Agreement with Zhejiang Communications Finance to, 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 virtue of this shareholding interest, Communications Group is a substantial shareholder (as defined under the Listing Rules) of the Company. As at the date of this announcement, the Company, Communications Group, Ningbo Expressway Co. and Taizhou Expressway Co. beneficially own 35%, 40%, 15.625% and 9.375% of the issued share capital ofZhejiang Communications Finance, respectively. Therefore, Zhejiang Communications Finance is a connected person of the Company and as a result, each of the Deposit Services, the Loan and Financial Leasing Services, the Clearing Services and the Other Financial Services contemplated under the New Financial Services Agreement constitutes a continuing connected transaction for the Company under Chapter 14A of the Listing Rules.
As each of the applicable percentage ratios in respect of the Deposit Services under the New Financial Services Agreement is more than 0.1% but less than 5%, the Deposit Services will constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules subject to the reporting, announcement and annual review requirements under Chapter 14A of the Listing Rules, but are exempt from the independent shareholders' approval requirement under Chapter 14A of the Listing Rules.
The Loan and Financial Leasing Services under the New Financial Services Agreement will constitute financial assistance provided by a connected person. As such loan services will be provided on normal commercial terms or on terms which are more favorable to the Group and will not be secured by the assets of the Group, the Loan and Financial Leasing Services under the New Financial Services Agreement are exempt from announcement, reporting, annual review and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.
The Company expects that each of the applicable percentage ratios (as defined in Rule 14.07 of Listing Rules) of the total fees payable by the Group to Zhejiang Communications Finance under the Clearing Services and the Other financial Services will fall within the de minimis threshold as stipulated under Chapter 14A of the Listing Rules. The Company will comply with the reporting, announcement and independent shareholders' approval requirements of the Listing Rules in the event that the transaction amount of the Clearing Services and the Other Financial Services to be provided by Zhejiang Communications Finance to the Group under the New Financial Services Agreement is expected to exceed the relevant threshold.
NEW FINANCIAL SERVICES AGREEMENT
Reference is made to the announcements of the Company dated July 19, 2013 and March 28, 2014 relating to the Existing Financial Services Agreement in relation to, among others, the provision of Deposit Services, Loan and Financial Leasing Services, Clearing Services and the Other Financial Services by Zhejiang Communications Finance to the Group.
It is currently expected by the Company that the existing annual cap for the Deposit Services will be insufficient to satisfy the Group's future needs. As such, on March 30, 2016 the Company entered into the New Financial Services Agreement with Zhejiang Communications Finance to, among others, increase the annual cap for the Deposit Services. The principal terms of the New Financial Services Agreement are set out below:
Date: March 30, 2016
Parties
(i) the Company; and
(ii) Zhejiang Communications Finance.
Principal services to be provided
- Pursuant to the New Financial Services Agreement, the 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. The financial services will be provided under the New Financial Services Agreement on a non-exclusive basis and the Group is entitled to determine whether to accept the financial services provided by Zhejiang Communications Finance or decide to accept the financial services provided by other financial institutions. The Group is not obliged to accept any financial services provided by Zhejiang Communications Finance under the New Financial Services Agreement.
- In respect of the provision of the Deposit Services under the New Financial Services Agreement, Zhejiang Communications Finance may provide current deposit, time deposit, call deposit or agreement deposit services to the Group. The Group will choose the deposit service to be provided.
- In respect of the provision of the Loan and Financial Leasing Services under the New Financial Services Agreement, Zhejiang Communications Finance will grant integrated credit facilities of no less than RMB1.5 billion 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, the services to be provided by Zhejiang Communications Finance include, but is not limited to: financial consulting service, letters of credit and related consulting services, insurance agency, entrusted loans, and acceptance and discount of bills, provided that the services to be provided shall be within the permitted business scope of Zhejiang Communications Finance as approved by CBRC.
- 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.
Annual caps and basis of determination for annual caps
- Deposit Services
Pursuant to the New Financial Services Agreement, the annual cap for the maximum daily aggregate outstanding balance of deposits has been increased from RMB700,000,000 to RMB1,500,000,000. The annual cap was determined after taking into account of the size of the total assets of the Group and the anticipated daily outstanding balance of deposits of the Group. In particular, the Directors note that the maximum daily deposit balance during 2014 and 2015 was approximately RMB, 627,870,000 and approximately RMB 662,017,000respectively. - Loan and Financial Leasing Services
As the Loan and Financial Leasing Services to be provided by Zhejiang Communications Finance to the Group will be on normal commercial terms and that no security over the assets of the Group will be granted in respect of such loan services, the Loan and Financial Leasing services are exempt from the reporting, announcement, annual review and independent shareholders' approval requirements under Chapter 14A of the Listing Rules and therefore no cap has been set for such services. - Clearing Services
The Company expects that each of the applicable percentage ratios (as defined in Rule 14.07 of the Listing Rules) of the total fees payable by the Group to Zhejiang Communications Finance under the Clearing Services will fall within the de minimis threshold as stipulated under Chapter 14A of the Listing Rules and therefore no cap has been set for such services. The Company will comply with the reporting, announcement and independent shareholders' approval requirements of the Listing Rules in the event that the transaction amount of the Clearing Services to be provided by Zhejiang Communications Finance to the Group under the New Financial Services Agreement is expected to exceed the relevant threshold. - Other Financial Services
The Company expects that each of the applicable percentage ratios (as defined in Rule 14.07 of the Listing Rules) of the total fees payable by the Group to Zhejiang Communications Finance under the Other financial Services will fall within the de minimis threshold as stipulated under Chapter 14A of the Listing Rules an d therefore no cap has been set for such services. The Company will comply with the reporting, announcement and independent shareholders' approval requirements of the Listing Rules in the event that the transaction amount of the Other Financial Services to be provided by Zhejiang Communications Finance to the Group under the New Financial Services Agreement is expected to exceed the relevant threshold. The Company confirms that there will be no provision of financial assistance by the Group to Zhejiang Communications Finance under the New Financial Services Agreement.
Effective date
The New Financial Services Agreement becomes effective upon execution by the Company and Zhejiang Communications Finance. Once the New Financial Services Agreement comes into effect, it will supersede the Existing Financial 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.
The Group expects to utilise the services to be provided by Zhejiang Communications Finance under New the Financial Services Agreement after the New Financial Services Agreement becomes effective and when the need arises.
Term
The term of the New Financial Services Agreement is for three years from its effective date (i.e. March 30, 2016). Subject to the parties' agreement and compliance with requirements of relevant laws and the Listing Rules, the parties may renew the New Financial Services Agreement at the end of its term.
Governing law
The laws of the PRC.
REASONS FOR AND BENEFITS OF THE FINANCIAL SERVICES AGREEMENT
Zhejiang Communications Finance was an associate of the Company. With the New Financial Services Agreement, the Company expects to derive synergy from utilising services provided by Zhejiang Communications Finance through the ordinary and usual course of business of both companies. The Directors, including all of the independent non-executive Directors, consider that the transactions contemplated under the New Financial Services Agreement are fair and reasonable, on normal commercial terms and are in the interests of the Company and the Shareholders as a whole. 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 New Financial Services 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 the New Financial Services Agreement or is required to abstain from voting on the relevant Board resolutions to approve the same.
INFORMATION ON ZHEJIANG COMMUNICATIONS FINANCE
Zhejiang Communications Finance is a limited liability company incorporated in the PRC on 9 November 2012 and approved by CBRC as a non-banking financial institution on 17 October 2012 with a registered capital of RMB800 million. As at the date of this announcement, Zhejiang Communications Finance is owned as 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 of providing financial services to the subsidiaries of Communications Group, including but not limited to advising the subsidiaries of the Communications Group in relation to financing, letters of credit and other agency services; authorised insurance businesses; providing guarantees, accepting and discounting commercial notes, arranging for loans and financial leases, and receiving deposits from the subsidiaries of the Communications Group.
INFORMATION ON THE COMPANY
The Company is a joint stock limited 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 automobile servicing, operation of gas stations and billboard advertising along expressways, as well as securities related business.
LISTING RULES IMPLICATIONS
As at the date of this announcement, the Communications Group holds approximately 67% of the issued share capital of the Company. By virtue of this shareholding interest, Communications Group is a substantial shareholder (as defined under the Listing Rules) of the Company. As at the date of this announcement, the Company, Communications Group, Ningbo Expressway Co. and Taizhou Expressway Co. beneficially own 35%, 40%, 15.625% and 9.375% of the issued share capital of Zhejiang Communications Finance, respectively. Therefore, Zhejiang Communications Finance is a connected person of the Company and as a result, each of the Deposit Services, the Loan and Financial Leasing Services, the Clearing Services and the Other Financial Services contemplated under the New Financial Services Agreement constitutes a continuing connected transaction for the Company under Chapter 14A of the Listing Rules.
As each of the applicable percentage ratios in respect of the Deposit Services under the New Financial Services Agreement is more than 0.1% but less than 5%, the Deposit Services will constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules subject to the reporting, announcement and annual review requirements under Chapter 14A of the Listing Rules, but are exempt from the independent shareholders' approval requirement under Chapter 14A of the Listing Rules.
The Loan and Financial Leasing Services under the New Financial Services Agreement will constitute financial assistance provided by a connected person. As such loan services will be provided on normal commercial terms or on terms which are more favorable to the Group and will not be secured by the assets of the Group, the Loan and Financial Leasing Services under the New Financial Services Agreement are exempt from announcement, reporting, annual review and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.
The Company expects that each of the applicable percentage ratios (as defined in Rule 14.07 of Listing Rules) of the total fees payable by the Group to Zhejiang Communications Finance under the Clearing Services and the Other financial Services will fall within the de minimis threshold as stipulated under Chapter 14A of the Listing Rules. The Company will comply with the reporting, announcement and independent shareholders' approval requirements of the Listing Rules in the event that the transaction amount of the Clearing Services or the Other Financial Services to be provided by Zhejiang Communications Finance to the Group under the New Financial Services Agreement is expected to exceed the relevant threshold.
| DEFINITIONS | |
| "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; |
| "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 Group pursuant to the Existing Financial Services Agreement or (as the case may be) the New Financial Services Agreement as described under the section headed "Principal services to be provided" in this announcement; |
| "Communications Group" | Zhejiang Communications Investment Group Co., Ltd., a wholly stateowned 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, the H shares of which are listed on the Main Board of the Stock Exchange; |
| "connected persons" | has the meaning ascribed to it in the Listing Rules; |
| "continuing connected transaction" | has the meaning ascribed to it in the Listing Rules; |
| "Deposit Services" | the cash deposit services provided or proposed to be provided by Zhejiang Communications Finance to the Group pursuant to the Existing Financial Services Agreement or (as the case may be) the New Financial Services Agreement as described under the section headed "Principal services to be provided" in this announcement; |
| "Directors" | directors of the Company; |
| "New Financial Services Agreement" | the financial services agreement dated March 30, 2016 entered into between the Company and Zhejiang Communications Finance, 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; |
| "Existing Financial Services Agreement" | the financial services agreement dated July 18, 2013 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; |
| "Listing Rules" | the Rules Governing the Listing of Securities on the Stock Exchange; |
| "Loan and Financial leasing services" | the loan and financial leasing services provided or proposed to be provided by Zhejiang Communications Finance to the Group pursuant to the New Financial Services Agreement as described under the headed "Principal services to be provided" 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) proposed to be provided by Zhejiang Communications Finance to the Group pursuant to the Existing Financial Services Agreement or (as the case may be) the New Financial Services Agreement as described under the section headed "Principal services to be provided" in this announcement; |
| "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; |
| "Shareholders" | shareholders of the Company; |
| "Stock Exchange" | The Stock Exchange of Hong Kong Limited; |
| "Taizhou Expressway Co." | Zhejiang Taizhou Yongtaiwen Expressway Co., Ltd., a limited liability company incorporated in the PRC and a 71.7719% owned subsidiary of Communications Group; and |
| "Zhejiang Communications Finance" | Zhejiang Communications Investment Group Finance Co., Ltd., a limited liability company incorporated in the PRC. |
On behalf of the Board
ZHEJIANG EXPRESSWAY CO., LTD.
ZHAN Xiaozhang
Chairman
Hangzhou, the PRC, March 30, 2016
As at 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.
