The board of China Water Affairs Group Limited announced that the company has entered into the Cooperation Agreement in relation to the strategic cooperation with Huaihua Water Investments on direct drinking water projects in Huaihua city, Hunan Province. Pursuant to the Cooperation Agreement, Silver Dragon and the designated subsidiary of Huaihua Water Investments shall jointly invest in constructing pipeline direct drinking water supply system based on the existing water supply system in Huaihua city, Hunan Province. The projects are scheduled in phases with the aim of bringing high quality pipeline direct drinking water to basically the entire city covering households, work place, studying and other living places within five to ten years. It is expected that the pipeline direct drinking water system will cover a population of approximately 600,000 with a daily direct drinking water supply capacity of approximately 1,800 tonnes. The parties shall set up a joint working group to negotiate on the concrete terms of cooperation. It is expected that the projects will be carried out by a joint venture with the designated subsidiary of Huaihua Water Investments. The proposed registered capital of the joint venture is RMB50 million whose shareholding will be 60% held by Silver Dragon. The Company considers that the prospects of pipeline direct drinking water business in China is huge and in line with the new concept of low-carbon green development. The Group currently has water supply and pipeline direct drinking water projects in Hunan. The Cooperation Agreement represents a further development of the Group's direct drinking water business in Hunan and will strengthen the synergy effect in the region and province. To the best of the Directors' knowledge, information and belief, and after making all reasonable enquiries, Huaihua Water Investments is an Independent Third Party.