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
(audited) |
RMB'000
(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 Co" |
Zhejiang Expressway Advertising Co., Ltd. is a company
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 Group" |
(Zhejiang Communications Investment Group Co., Ltd.),
a wholly 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 person(s)" |
has the meaning ascribed to it under the Listing
Rules |
"controlling shareholder" |
has the meaning ascribed to it under the Listing
Rules |
"Deloitte" |
Deloitte Touche Tohmatsu, the auditors of the
Company |
"Development Co" |
Zhejiang Expressway Investment Development Co., L t d
. 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 Board Committee" |
an independent committee of the Board comprising 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 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 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 Hong
Kong Stock Exchange |
"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 |
"Shareholder(s)" |
holder(s) of the share(s) of the Company |
"Share Purchase Agreement" |
the agreement dated 17 October 2016 entered into
between the 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 Exchange" |
The Stock Exchange of Hong Kong Limited |
"subsidiary(ies)" |
has the meaning ascribed to it under the Listing
Rules |
"Valuation Report" |
the valuation report dated 25 September 2016 prepared
by the Valuer |
"Valuer" |
Tian Yuan Appraisal Co., Ltd., the qualified
independent valuer appointed by the Company in respect of
Development Co |
"Zhejiang Communications Investment" |
(Zhejiang Communications Investment Group Industrial
Development Co., Ltd.*) a company incorporated in the PRC and a
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:
APPENDIX 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
APPENDIX 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
INDEPENDENT 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