Joint Venture Agreement

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雲南水務投資股份有限公司 Yunnan Water Investment Co., Limited* (a joint stock limited liability company incorporated in the People’s Republic of China) (Stock code: 6839)

ANNOUNCEMENT DISCLOSEABLE TRANSACTION

JOINT VENTURE AGREEMENT

Reference is made to the inside information announcement of the Company dated 3 May 2018 in relation to the Company’s formal tender award of the PPP Project in Harbin City, Heilongjiang Province, the PRC.

On 15 June 2018, the Company and Tongda Water Supply and Drainage entered into the Original Joint Venture Agreement. Pursuant to the terms of the Original Joint Venture Agreement, the parties to the Original Joint Venture Agreement agreed to establish the JV Company with an original registered capital of RMB240,000,000. The JV Company is originally owned as to 58.90% by the Company and 41.10% by Tongda Water Supply and Drainage. The JV Company is responsible for the investment, financing, construction, operation and maintenance and transfer of the PPP Project and takes risks thereof. The JV Company has been incorporated on 18 December 2018.

At the beginning of 2019, the People’s Government of Shuangcheng District proposed to optimise and rectify the PPP Project, and the project optimisation and rectification plan required revision to the Original Joint Venture Agreement.

The Board is pleased to announce that on 16 August 2019 (after trading hours), the Company and Tongda Water Supply and Drainage entered into the Joint Venture Agreement, which is the revised document of the Original Joint Venture Agreement. For any inconsistency between the Joint Venture Agreement and the Original Joint Venture Agreement, the Joint Venture Agreement shall prevail. Pursuant to the terms of the Joint Venture Agreement, the registered capital of the JV Company shall be adjusted from RMB240,000,000 to RMB202,102,650, and the JV Company shall be owned as to 99.99999951% by the Company and 0.00000049% by Tongda Water Supply and Drainage.

1 IMPLICATIONS OF THE LISTING RULES

As one or more of the applicable percentage ratio(s) for the transactions contemplated under the Original Joint Venture Agreement is/are less than 5%, the transactions contemplated under the Original Joint Venture Agreement do not constitute discloseable transactions of the Company and are therefore not subject to the notification and announcement requirements under Chapter 14 of the Listing Rules.

As one or more of the applicable percentage ratio(s) for the transactions contemplated under the Joint Venture Agreement is/are more than 5% but all of them are less than 25%, the transactions contemplated under the Joint Venture Agreement constitute discloseable transactions of the Company and are therefore subject to the notification and announcement requirements under Chapter 14 of the Listing Rules.

INTRODUCTION

2 ORIGINAL JOINT VENTURE AGREEMENT

The principal terms of the Original Joint Venture Agreement are set out below:

Date: 15 June 2018

Parties: (i) the Company; and

(ii) Tongda Water Supply and Drainage

Original registered capital and capital contribution

The total amount of the original registered capital of the JV Company is RMB240,000,000. The details are as follows:

Amount of capital Shareholding contribution percentage (RMB) (%)

The Company 141,360,000 58.90% Tongda Water Supply and Drainage 98,640,000 41.10%

Total 240,000,000 100%

JOINT VENTURE AGREEMENT

The principal terms of the Joint Venture Agreement are set out below:

Date: 16 August 2019 (after trading hours)

Parties: (i) the Company; and

(ii) Tongda Water Supply and Drainage

3 Registered capital and capital contribution

The total amount of registered capital of the JV Company is RMB202,102,650. The details are as follows:

Amount of capital Shareholding contribution percentage (RMB) (%)

The Company 202,102,649 99.99999951% Tongda Water Supply and Drainage 1 0.00000049%

Total 202,102,650 100%

The amount of the registered capital of the JV Company was determined by the parties after arm’s length negotiations with reference to the initial capital requirement for the development of the business of the JV Company.

The Company and Tongda Water Supply and Drainage shall both make capital contribution in cash. Within 15 days from the date of entering into of the Concession Agreement of PPP Project, the Company is required to pay up 20% of its capital contribution, while Tongda Water Supply and Drainage is required to pay up the total amount of its capital contribution in one lump sum. Within 180 days from the date of entering into of the Concession Agreement of PPP Project, the Company is required to pay up 60% of its capital contribution. The remaining registered capital shall be negotiated and decided by the parties to the Joint Venture Agreement based on the progress of the PPP Project in compliance with applicable laws.

If any party to the Joint Venture Agreement fails to pay for the contribution as stipulated in the Joint Venture Agreement without any justifiable reason, the party shall be deemed to have breached the agreement. In addition to performing its contribution obligation under the agreement, the defaulting party shall also assume breach liability with the non-defaulting party, and damages will be calculated at 0.02% of the total amount of registered capital of the JV Company for each overdue day. If any party to the Joint Venture Agreement fails to pay for the contribution as stipulated in the Joint Venture Agreement without any justifiable reason and also fails to make full payment of the contribution within 30 days upon receipt of a written notice from the non-defaulting party requiring the full payment of such contribution, the non-defaulting party shall have the right to terminate the Joint Venture Agreement with the JV Company pursuant to its articles of association.

If the JV Company intends to increase the registered capital after its establishment, the parties to the Joint Venture Agreement may pay up the increased registered capital according to their shareholding proportion in the JV Company for the time being. If any party to the Joint Venture Agreement does not agree to pay up the increased registered capital according to its shareholding proportion for the time being, with the written consent of Shuangcheng Water Supply and Drainage Group, the other party or other third party investors identified by the parties may preferentially pay up the contribution that such party is entitled to contribute, and the shareholding structure of the JV Company shall be adjusted accordingly.

4 The JV Company shall not reduce its registered capital within the operating period. In the event that reducing the registered capital is necessary due to changes in the total investment in the PPP Project, the approval of Shuangcheng Water Supply and Drainage Group must be obtained and the relevant legal proceedings must be performed.

Restriction on equity transfer

Without the approvals at the general meeting of the JV Company and of Shuangcheng Water Supply and Drainage Group, any party to the Joint Venture Agreement shall not transfer, mortgage, pledge, gift or otherwise dispose of its equity interests, whether in whole or in part, in the JV Company. When the Company transfers all or part of the equity interests held by it in the JV Company, a prior written consent of Shuangcheng Water Supply and Drainage Group must be obtained.

Tongda Water Supply and Drainage has the right to transfer all or part of the equity interests held by it in the JV Company to a third party in accordance with the relevant state-owned assets management regulations or the reasonable requirements of the People’s Government of Shuangcheng District. Such transfer does not require the prior consent of the Company, but should notify the Company 30 days in advance.

When any party to the Joint Venture Agreement transfers all or part of its equity interests in the JV Company, it should notify the other party to the Joint Venture Agreement in writing of the terms and conditions for the purchase by a third party. Under the same conditions, the other party to the Joint Venture Agreement is entitled to the pre-emptive right. If the other party to the Joint Venture Agreement does not exercise its pre-emptive right within 30 days upon receipt of the above mentioned written notice, it is deemed to have agreed to the transfer.

The board composition and management structure of the JV Company

The composition of the board of directors of the JV Company (the “Board of JV Company”) includes five directors, of which one director will be delegated by Tongda Water Supply and Drainage and the other four will be delegated by the Company. The chairman shall be the director delegated by the Company, while the vice chairman shall be the director delegated by Tongda Water Supply and Drainage. The Board of JV Company shall serve for a term of three years for each session, and is eligible for re-election.

The composition of the management of the JV Company (the “Management of JV Company”) includes one general manager, certain deputy general managers, a financial controller, a vice financial controller and a chief engineer. Among which, the general manager shall be nominated by the Company, and the other management such as the financial controller shall be nominated by the general manager or the chairman. The Management of JV Company, who shall be appointed and dismissed by the Board of JV Company, shall serve for a term of three years for each session, and is eligible for re-election.

5 INFORMATION ON TONGDA WATER SUPPLY AND DRAINAGE

Tongda Water Supply and Drainage is a wholly state-owned company with limited liability established in the PRC. It is primarily engaged in centralized water supply, wastewater treatment and sales of water processing facilities. Tongda Water Supply and Drainage represents the People’s Government of Shuangcheng District to perform the functions of the state-owned asset contributor to the JV Company.

To the best knowledge, information and belief of the Directors after making all reasonable enquiries, Tongda Water Supply and Drainage and its ultimate beneficial owners (if applicable) are third parties independent of the Company and its connected persons (as defined in the Listing Rules).

REASONS FOR AND BENEFITS OF THE JOINT VENTURE AGREEMENT

The Group is one of the leading integrated service providers in urban wastewater treatment and water supply industries in Yunnan Province, the PRC. The principal businesses of the Group include (i) providing water supply, wastewater treatment and solid waste treatment in various cities in the PRC and Southeast Asia; (ii) investment, construction and management of environmental projects; and (iii) sales of equipment and other environmental protection related services. The corporate strategy of the Group is to operate its businesses based in Yunnan Province while continuing to seek investment opportunities to expand its business to other regions to secure a stable source of income.

The Directors consider that the implementation of the PPP Project is of great significance for improving the urban infrastructure construction and living environment in the Shuangcheng District of Harbin. It can also provide the Group with a good opportunity to further expand its business in the market of Heilongjiang Province, enhance its profitability and improve its influence over the environmental protection industry in Heilongjiang Province and achieve cross- regional development. With the PPP Project as a stronghold, the Group will continue to expand its environmental protection project business in Heilongjiang Province, the PRC to enhance the profitability of the Group by fully utilizing its capital and technological strength.

After considering the above factors, the Directors are of the view that the Joint Venture Agreement was entered into after arm’s length negotiations and on normal commercial terms, and is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

IMPLICATIONS OF THE LISTING RULES

6 As one or more of the applicable percentage ratio(s) for the transactions contemplated under the Joint Venture Agreement is/are more than 5% but all of them are less than 25%, the transactions contemplated under the Joint Venture Agreement constitute discloseable transactions of the Company and are therefore subject to the notification and announcement requirements under Chapter 14 of the Listing Rules.

DEFINITIONS

Unless the context otherwise requires, the following expressions shall have the following meanings in this announcement:

“Board” the board of Directors;

“Company” Yunnan Water Investment Co., Limited* (雲南水務投資股份有限公司), a joint stock limited liability company incorporated in the PRC, whose H Shares are listed on the Main Board of the Stock Exchange (stock code: 6839);

“Concession Agreement of the Concession Agreement of PPP Project in Relation to the PPP Project” Integration of Water Supply and Drainage in Shuangcheng District, Harbin City, Heilongjiang Province (黑龍江省哈爾濱市雙城區供排水一體化PPP項目特許經營協議) to be entered into between the JV Company and Shuangcheng Water Supply and Drainage Group;

“Director(s)” the director(s) of the Company;

“Domestic Shares” the ordinary shares in issue in the share capital of the Company with a nominal value of RMB1.00 each, which are subscribed or credited as fully paid in RMB;

“H Shares” the ordinary shares in issue in the share capital of the Company with a nominal value of RMB1.00 each, which are listed on the Main Board of the Stock Exchange (stock code: 6839);

“Hong Kong” Hong Kong Special Administrative Region of the PRC;

“Joint Venture Agreement” the new joint venture agreement in relation to the PPP Project entered into between the Company and Tongda Water Supply and Drainage on 16 August 2019;

“JV Company” Harbin Yunshui Water Co., Ltd.* (哈爾濱雲水水務有限公司), a limited liability company established in the PRC on 18 December 2018 for the implementation of the PPP Project;

“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange;

7 “Original Joint Venture the original joint venture agreement entered into between the Agreement” Company and the Tongda Water Supply and Drainage on 15 June 2018;

“People’s Government of the People’s Government of Shuangcheng District, Harbin City, Shuangcheng District” Heilongjiang Province, the PRC which grants the PPP Project;

“PPP Project” the project in relation to the integration of water supply and drainage in Shuangcheng District, Harbin City, Heilongjiang Province, the PRC under public-private-partnership, which was awarded to the Company on 3 May 2018;

“PRC” the People’s Republic of China, for the purpose of this announcement only, excluding Hong Kong, Macau Special Administrative Region of the People’s Republic of China and Taiwan;

“RMB” Renminbi, the lawful currency of the PRC;

“Share(s)” Domestic Shares and/or H Shares;

“Shareholder(s)” the holder(s) of Share(s);

“Shuangcheng Water Supply Harbin Shuangcheng Water Supply and Drainage Group Co., Ltd.* and Drainage Group” (哈爾濱市雙城區供排水集團公司), the implementing agency of the PPP Project authorized by the People’s Government of Shuangcheng District;

“Stock Exchange” The Stock Exchange of Hong Kong Limited;

“Tongda Water Supply Shuangcheng Tongda Water Supply and Drainage Co., Ltd.* (雙城 and Drainage” 市通達供排水有限公司), a limited liability company established in the PRC, which is a special purpose vehicle authorized by the People’s Government of Shuangcheng District to perform the functions of the state-owned asset contributor; and

“%” per cent.

By order of the Board Yunnan Water Investment Co., Limited* Yang Tao Chairman

Kunming, the PRC 16 August 2019

As at the date of this announcement, the executive Directors are Mr. Yu Long (Vice-chairman) and Mr. Yang Fang, the non- executive Directors are Mr. Yang Tao (Chairman), Ms. Li Bo, Mr. He Yuanping, and Mr. Feng Zhuangzhi, and the independent non-executive Directors are Mr. Liu Shuen Kong, Mr. Hu Song and Mr. Ma Shihao.

* For identification purposes only