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Zhejiang Expressway Co Ld - Disposal of 100% Equity Interest in Development Co

Montag, 17.10.2016 16:30 von

PR Newswire

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