China Water Industry : MAJOR TRANSACTION IN RELATION TO THE DISPOSAL OF THE ENTIRE EQUITY INTERESTS IN HUIZHOU SWAN HENG CHANG PROPERTY DEVELOPMENT COMPANY LIMITED* AND NOTICE OF EXTRAORDINARY GENERAL MEETING

July 23, 2020 at 05:40 am EDT

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in China Water Industry Group Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser(s) or transferee(s) or to the bank, licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s).

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, 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 circular.

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 1129)

MAJOR TRANSACTION IN RELATION TO

THE DISPOSAL OF THE ENTIRE EQUITY INTERESTS IN HUIZHOU SWAN HENG CHANG PROPERTY DEVELOPMENT COMPANY LIMITED*

AND

NOTICE OF EXTRAORDINARY GENERAL MEETING

Capitalised terms used on this cover page have the same meaning as defined in the section headed ''Definitions'' in this circular, unless the context requires otherwise.

A letter from the Board is set out on pages 6 to 14 of this circular. A notice convening the EGM is set out on pages EGM-1 to EGM-2 of this circular.

A form of proxy for use at the EGM is enclosed with this circular. Whether or not you intend to attend the EGM, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company's Hong Kong branch share registrar, Union Registrars Limited at Suites 3301-04, 33/F, Two Chinachem Exchange Square, 338 King's Road, North Point, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the EGM or any adjourned meeting. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjourned meeting should you so wish.

24 July 2020

for identification purpose only

CONTENTS

			Page
DEFINITIONS .	. . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
APPENDIX I	- FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . .	15
APPENDIX II	-	PROPERTY VALUATION REPORT . . . . . . . . . . . . . . . . . . . . . . .	25
APPENDIX III	-	GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	33
NOTICE OF EXTRAORDINARY GENERAL MEETING . . . . . . . . . . . . . . . . . . . . . .	EGM-1

- i -

DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions have the following meanings unless the context requires otherwise:

''Board''	the board of Directors
''Business Day''	a day (other than a Saturday, Sunday or public holiday) on
	which licensed banks are generally open for business in
	Hong Kong throughout their normal business hours
''Company''	China Water Industry Group Limited, a company
	incorporated in the Cayman Islands with limited liability,
	the issued Shares of which are listed on the main board of
	the Stock Exchange
''Completion''	completion of the Disposal in accordance with the terms
	and conditions of the Disposal Agreement
''Completion Date''	a day falling within 30 Business Days after the Settlement
	Date on which the operation and management right over
	the Disposed Company is passed to the Purchaser
''connected person''	has the meaning ascribed to it in the Listing Rules
''Consideration''	the total consideration to be satisfied by the Purchaser to
	the Vendor for the Disposal
''Construction Contracts Debts''	t h e t o t a l o u t s t a n d i n g a m o u n t o f a p p r o x i m a t e l y
	R M B 1 1 , 5 0 4 , 0 0 0 ( e q u i v a l e n t t o a p p r o x i m a t e l y
	HK$12,424,000) owing by the Disposed Company to
	various contractors in relation to ongoing construction
	contracts entered into between the Disposed Company and
	various contractors as at 30 April 2020
''Contractor''	中民築友建設科技集團有限公司 (China Minsheng Drawin
	Construction Technology Group Co., Ltd.#), a contractor
	engaged by the Disposed Company in relation to the
	Project
''Custodian Bank''	a custodian bank in Huizhou to be appointed jointly by the
	Vendor and the Purchaser
''Custodian Bank Agreement''	an agreement to be entered into among the Purchaser, the
	Vendor and the Custodian Bank in relation to the
	arrangement regarding the Purchaser's Funding

- 1 -

DEFINITIONS

''Director(s)''	the director(s) of the Company
''Disposal''	the proposed disposal of the Sale Capital pursuant to the
	terms and conditions of the Disposal Agreement
''Disposal Agreement''	the agreement dated 10 June 2020 and entered into among
	the Vendor, the Purchaser and the Disposed Company in
	relation to the sale and purchase of the Sale Capital and the
	settlement arrangements of the Loan, the Vendor's Loans,
	the Project Debts and the Construction Contracts Debts
''Disposed Company''	惠州鴻鵠恒昌置業有限公司 (Huizhou Swan Heng Chang
	Property Development Company Limited*), a company
	established in the PRC with limited liability
''EGM''	the extraordinary general meeting of the Company to be
	held and convened for the Shareholders for considering
	and, if thought fit, approving, among other matters, the
	Disposal Agreement and the transactions contemplated
	thereunder
''Equity Interests Pledge	the equity interests pledge agreement dated 28 March 2019
Agreement''	made by the Vendor as the pledgor, in favour of Huizhou
	Rural Commercial Bank as the pledgee, pursuant to which
	the Vendor pledges its entire equity interests in and the
	entire registered capital of the Disposed Company to
	Huizhou Rural Commercial Bank as security for the
	performance of the obligations of the Disposed Company
	under the Loan Agreement
''Far East''	Far East International (Hong Kong) Chronic Disease
	R e h a b i l i t a t i o n C e n t e r C o . , L i m i t e d , a c o m p a n y
	incorporated in Hong Kong with limited liability and owns
	the entire registered capital of the Purchaser
''Group''	the Company and its subsidiaries
''Hong Kong''	the Hong Kong Special Administrative Region of the
	People's Republic of China

- 2 -

DEFINITIONS

''Independent Third Party(ies)''	any person or company and their respective ultimate
	beneficial owner(s) which, to the best of the Directors'
	knowledge, information and belief having made all
	reasonable enquiries, are third parties independent of the
	Company and its connected persons
''Land''	the land situated at No. 3, Taihao Road, Central Park,
	Sandongzhen, Hi-tech Technology Industrial Park,
	Huicheng District, Huizhou City, the PRC with a total site
	area of approximately 35,725 sq.m. and a term expiring on
	30 August 2066
''Latest Practicable Date''	21 July 2020, being the latest practicable date prior to the
	printing of this circular for the purpose of ascertaining
	certain information for inclusion in this circular
''Listing Rules''	the Rules Governing the Listing of Securities on the Stock
	Exchange
''Loan''	the loan in the principal amount of RMB45,000,000
	(equivalent to approximately HK$48,600,000) granted by
	Huizhou Rural Commercial Bank to the Disposed Company
	pursuant to the Loan Agreement
''Loan Agreement''	the loan agreement dated 28 March 2019 and entered into
	between Huizhou Rural Commercial Bank as the lender
	and the Disposed Company as the borrower in relation to
	the grant of the Loan
''Mr. Liu''	Mr. Liu Huidong（劉惠東先生）, being a shareholder of Far
	East interested in 92% of the issued share capital thereof,
	an Independent Third Party
''PRC''	the People's Republic of China, which for the purpose of
	this circular, shall exclude Hong Kong, Macau Special
	Administrative Region of the People's Republic of China
	and Taiwan
''Project''	the real estate project being carried out on the Land,
	namely Huizhou Swan Blue Valley Wisdom Square*（惠州
	鴻鵠藍谷智慧廣場）

- 3 -

DEFINITIONS

''Project Debt I''	the aggregate sum of accounts payables of approximately
	R M B 2 3 , 9 5 1 , 0 0 0 ( e q u i v a l e n t t o a p p r o x i m a t e l y
	HK$25,867,000) owing by the Disposed Company to the
	Contractor in relation to the Project as at 30 April 2020
''Project Debt II''	the aggregate sum of accounts payables of approximately
	R M B 1 2 , 7 3 7 , 0 0 0 ( e q u i v a l e n t t o a p p r o x i m a t e l y
	HK$13,756,000) owing by the Disposed Company to the
	various contractors in relation to the construction works of
	the Project being carried out but not yet settled as at 30
	April 2020
''Project Debt III''	the aggregate sum of accounts payables of approximately
	R M B 3 , 2 7 8 , 0 0 0 ( e q u i v a l e n t t o a p p r o x i m a t e l y
	HK$3,540,000) owing by the Disposed Company to the
	various contractors in relation to the costs incurred due to
	the delay of the Project as at 30 April 2020
''Project Debts''	collectively, the Project Debt I, the Project Debt II and the
	Project Debt III
''Purchaser''	惠州市遠東康壽園療養中心有限公司 (Huizhou Yuandong
	Kangshouyuan Medical Center Co., Ltd.#), a company
	established in the PRC with limited liability, a wholly-
	owned subsidiary of Far East and an Independent Third
	Party
''Purchaser's Funding''	a total amount of US$30,000,000 (equivalent to
	approximately HK$232,500,000) to be remitted by the
	Purchaser into the designated account with the Custodian
	Bank to be operated jointly by the Vendor and the
	Purchaser in accordance with the Custodian Bank
	Agreement
''Sale Capital''	the entire registered capital of the Disposed Company
''Settlement Date''	the date of settlement of the Consideration, being the date
	within three day after the completion
''Shareholder(s)''	holder(s) of the Shares
''Shares''	ordinary share(s) of HK$0.5 each in the share capital of the
	Company

- 4 -

DEFINITIONS

''Stock Exchange''

''Third Parties Agreement''

''Vendor''

''Vendor's Loan I''

''Vendor's Loan II''

''Vendor's Loans''

''HK$''

''RMB''

''US$''

''sq.m.''

''%''

The Stock Exchange of Hong Kong Limited

certain investment agreements entered into between the Disposed Company with various third party investors during the period from March 2018 to July 2018 in relation to, among other things, the Project

鴻鵠（惠州）投資有限公司 (Swan (Huizhou) Investment Company Limited), a company established in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company

the total amount of approximately RMB45,156,000 (equivalent to approximately HK$48,768,000) owing by the Disposed Company to the Vendor as at 30 April 2020 in relation to a loan granted by the Vendor to the Disposed Company and the amount paid by the Vendor on behalf of the Disposed Company in relation to the Project

the total amount of approximately RMB1,800,000 (equivalent to approximately HK$1,944,000) owing by the Disposed Company to the Vendor for the period from 1 May 2020 to the Settlement Date in relation to loans granted by the Vendor to the Disposed Company and the amount paid by the Vendor on behalf of the Disposed Company in support of its daily operation

collectively, the Vendor's Loan I and the Vendor's Loan II

Hong Kong dollars, the lawful currency of Hong Kong

Renminbi, the lawful currency of the PRC

United States dollars, the lawful currency of the United States of America

square metres

per cent.

For the purpose of this circular, unless the context otherwise requires, conversion of RMB into HK$ is based on the approximate exchange rate of RMB1 to HK$1.08 and conversion of US$ into HK$ is based on the approximate exchange rate of US$1 to HK$7.75.

The English translation of Chinese names or words in this circular, where indicated, are included for information purpose only, and should not be regarded as the official English translation of such Chinese names and words.

- 5 -

LETTER FROM THE BOARD

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 1129)

Executive Directors:	Registered office:
Mr. Lin Yue Hui	Cricket Square
(Chairman and Chief Executive Officer)	Hutchins Drive
Mr. Zhong Wei Guang (Chief Operating Officer)	P.O. Box 2681
Mr. Liu Feng	Grand Cayman KY1-1111
Ms. Chu Yin Yin, Georgiana	Cayman Islands
Ms. Deng Xiao Ting
Mr. Ho Chi Ho	Head office and principal place of
Mr. Zhu Yongjun	business in Hong Kong:
	Room 1207, 12th Floor
Independent Non-executive Directors:	West Tower, Shun Tak Centre
Mr. Wong Siu Keung, Joe	168-200 Connaught Road Central
Mr. Guo Chao Tian	Sheung Wan, Hong Kong
Ms. Qiu Na
Mr. Lam Cheung Shing, Richard	24 July 2020
To the Shareholders
Dear Sir/Madam,

MAJOR TRANSACTION IN RELATION TO

THE DISPOSAL OF THE ENTIRE EQUITY INTERESTS IN HUIZHOU SWAN HENG CHANG PROPERTY DEVELOPMENT COMPANY LIMITED

AND

NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

Reference is made to the announcement of the Company dated 10 June 2020 in respect of, among other things, the Disposal Agreement dated 10 June 2020 and entered into, among others, the Vendor and the Purchaser pursuant to which (i) the Vendor has conditionally agreed to sell and the Purchaser has conditionally agreed to acquire, the Sale Capital, which represents the entire registered capital of the Disposed Company upon Completion for an aggregate

For identification purpose only

- 6 -

LETTER FROM THE BOARD

consideration of approximately RMB161,049,000 (equivalent to approximately HK$173,933,000); and (ii) the Vendor and the Purchaser have agreed to the arrangement relating to the Loan, the Vendor's Loans, the Project Debts and the Construction Contracts Debts.

The purpose of this circular is to provide you with the information relating to, among other things, (i) details of the Disposal; and (ii) other information as required by the Listing Rules. A notice of the EGM is set out on pages EGM-1 to EGM-2 of this circular.

THE DISPOSAL AGREEMENT

Date:	10 June 2020 (after trading hours of the Stock Exchange)
Parties:	(1)	鴻鵠（惠州）投資有限公司 (Swan (Huizhou) Investment Company
		Limited), as the Vendor;
	(2)	惠州市遠東康壽園療養中心有限公司 ( H u i z h o u Y u a n d o n g
		Kangshouyuan Medical Center Co., Ltd.#), as the Purchaser; and
	(3)	惠州鴻鵠恒昌置業有限公司 (Huizhou Swan Heng Chang Property
		Development Company Limited#), as the Disposed Company

To the best of the Directors' knowledge, information and belief having made all reasonable enquiries each of the Purchaser, its ultimate beneficial owner and their respective associates is an Independent Third Party.

Assets to be disposed of

Pursuant to the Disposal Agreement, the Vendor has conditionally agreed to sell, and the Purchaser has conditionally agreed to acquire, the Sale Capital, which represents the entire registered capital in the Disposed Company.

Consideration

The aggregate consideration for the sale and purchase of the Sale Capital is approximately RMB161,049,000 (equivalent to approximately HK$173,933,000), which shall be paid by the Purchaser to the Vendor on the Settlement Date. Such Consideration shall be drawn from the Purchaser's Funding upon the submission of the change in shareholding notification and the payment instruction to the Custodian Bank by the Vendor and the Purchaser.

- 7 -

LETTER FROM THE BOARD

The consideration was arrived at after arm's length negotiations between the Vendor and the Purchaser having taken into account, among other things, (i) the Disposed Company's unaudited net asset value of (a) approximately RMB32,387,000 (equivalent to approximately HK$34,978,000) and (b) approximately RMB75,737,000 (equivalent to approximately HK$81,796,000) having taken into account the fair value of the Land and properties involved in the Project as mentioned in (iii) below, respectively, as at 30 April 2020; (ii) the expected unaudited gain on Disposal; and (iii) the valuation prepared by an independent valuer showing fair value of the Land and properties involved in the Project as at 30 April 2020 of approximately RMB192,243,000 (equivalent to approximately HK$207,622,000) under market approach; and (iv) the total liabilities of the Disposed Company of approximately RMB119,773,000 (equivalent to approximately HK$129,355,000) as at 30 April 2020.

As at the Latest Practicable Date, the Sale Capital is pledged by the Vendor to secure all sums of money in respect of the Loan in favour of the bank under the Equity Interests Pledge Agreement.

The Purchaser's Funding shall only be used for settling the Consideration.

Conditions precedent

The Disposal shall be conditional upon and subject to:

the passing by the respective shareholders and directors of each of the Vendor, the Company, the Purchaser and the Disposed Company at their respective shareholder's meeting and board meeting to be convened and held of the resolutions to approve the Disposal Agreement and the transactions contemplated thereunder;
the evaluation, audit and due diligence on the Disposed Company having been conducted and performed by the Purchaser or an independent third party appointed by the Purchaser;
a bank reference letter having been issued by a bank to the Vendor showing an amount of US$30,000,000 (equivalent to approximately HK$232,500,000) having been deposited into the bank account of Mr. Liu opened with such bank; a bank reference letter having been issued by a bank to the Vendor showing an amount of US$30,000,000 (equivalent to approximately HK$232,500,000) having been deposited into the bank account of Far East opened with such bank; and a commitment letter by Far East having been provided to the Vendor to guarantee the performance of the Purchaser's obligations under the Disposal Agreement;
the submission of the assets assessment report and the feasibility report and the remittance of the Purchaser's Funding into the Custodian Bank having been made and the relevant bank confirmation having been obtained; and the pledge under the Equity Interests Pledge Agreement having been released;

- 8 -

LETTER FROM THE BOARD

the Purchaser's Funding having been remitted to the Custodian Bank in Huizhou by Far East and a proof of funds issued by the Custodian Bank having been provided by the Purchaser to the Vendor after the fulfillment of the above conditions (1) to (4); and
if required, the passing by the Shareholders at the EGM to be convened and held of an ordinary resolution to approve the Disposal Agreement and the transactions contemplated thereunder.

Save for condition (2) above, all the conditions are unwaivable. If the conditions above have not been satisfied (or waived) on or before 8 September 2020 (being the 90th day upon the signing of the Disposal Agreement) or such later date as the Vendor and the Purchaser may agree in writing (the ''Long Stop Date''), the Disposal Agreement shall cease and determine and neither party shall have any obligations and liabilities towards each other thereunder save for any antecedent breaches of the terms thereof.

As at the Latest Practicable Date, conditions (1) and (2) have been fulfilled.

Completion

The Completion shall take place on the Completion Date, where the Vendor and the Purchaser shall execute a written confirmation to confirm the Completion.

Upon Completion, the Company shall cease to have any interests in the Disposed Company. The Disposed Company will cease to be a subsidiary of the Company and the financial results of the Disposed Company will cease to be consolidated into those of the Group.

The Third Parties Agreements

The Third Parties Agreements were previously entered into between the Disposed Company with certain third party investors in relation to, among other things, the potential investment in Huizhou Swan Blue Valley Wisdom Square*（惠州鴻鵠藍谷智慧廣場）.

The Vendor had on behalf of the Disposed Company collected the payments (the ''Payments'') in the aggregated sum of approximately RMB17,628,000 (equivalent to approximately HK$19,038,000) paid by the third party investors under the Third Parties Agreements. Pursuant to the Disposal Agreement, if, before the completion of the registration procedures for the transfer of the Sale Capital, the Vendor, the Disposed Company and the relevant third party investor(s):

had unanimously agreed to terminate the relevant Third Parties Agreements, the Payments made under such Third Parties Agreements shall belong to the Vendor and the Vendor shall be responsible for the refund and compensation of the relevant third party in relation to the termination of the Third Parties Agreements; and/or

- 9 -

LETTER FROM THE BOARD

had not unanimously agreed to terminate the relevant Third Parties Agreements, the Payments made under such Third Parties Agreements shall belong to the Disposed Company and the Vendor shall transfer the relevant Payments back to the Disposed Company's bank account. The Disposed Company shall continue to perform its obligations under the relevant Third Parties Agreements.

As advised by the PRC legal adviser to the Company, the Vendor's maximum exposure relating to the Third Parties Agreements shall not exceed 30% of the Payments, representing approximately RMB5,288,000 (equivalent to approximately HK$5,711,000).

Vendor's Loans

As at 30 April 2020, the Disposed Company was indebted to the Vendor in the total amount of RMB45,156,000 (equivalent to approximately HK$48,768,000). For the period commencing on 1 May 2020 up to the Settlement Date, the Vendor has advanced and would advance to the Disposed Company sums in the total amount of approximately RMB1,800,000 (equivalent to approximately HK$1,944,000) to support its daily operation. It is agreed under the Disposal Agreement that the Vendor's Loans will be capitalised within 10 Business Days after the Purchaser's Funding is deposited into the Custodian Bank and shall form part of the Sale Capital upon Completion.

Project Debts and Construction Contracts Debts

As at 30 April 2020, the aggregate outstanding amount of the Project Debts, which consists of the Project Debt I, the Project Debt II and the Project Debt III, amounted to approximately RMB39,966,000 (equivalent to approximately HK$43,163,000).

As at 30 April 2020, the Construction Contracts Debts in the total outstanding amount of approximately RMB11,504,000 (equivalent to approximately HK$12,424,000) was owed by the Disposed Company to various contractors in relation to ongoing construction contracts entered into between the Disposed Company and various contractors.

Pursuant to the Disposal Agreement, the Vendor shall be responsible for the Project Debt II and the Project Debt III. Upon and after the Completion, the Loan, the Project Debt I and the Construction Contracts Debts shall be borne by the Purchaser and/or the Disposed Company.

For the avoidance of doubt, the Vendor shall not have any obligations in relation to the debts of the Disposed Company upon the transfer of the entire equity interests in the Disposed Company from the Vendor to the Purchaser.

- 10 -

LETTER FROM THE BOARD

INFORMATION ON THE PURCHASER, THE VENDOR AND THE DISPOSED COMPANY

To the best of the knowledge, information and belief of the Directors and having made all reasonable enquires, the Purchaser is a company established in the PRC with limited liability, a wholly-owned subsidiary of Far East and is principally engaged in the research of rehabilitation medical treatment and geriatrics and the provision of related products and services. Far East is a company incorporated in Hong Kong with limited liability and its ultimate beneficial owners are Mr. Liu and Mr. Lin Yongzheng who are interested in the issued share capital of Far East as to 92% and 8% respectively.

The Vendor is a company established in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company. It is principally engaged in investment holding.

The Disposed Company is a company established in the PRC with limited liability which owns the Land and is engaged in the Project.

Set out below is the financial information of the Disposed Company as extracted from its unaudited and audited financial statements prepared in accordance with generally accepted accounting principles in the PRC for the two financial years ended 31 December 2018 and 2019 and for the four months ended 30 April 2020:

	For the four
	months ended	For the year ended
	30 April	31 December	31 December
	2020	2019	2018
	(RMB)	(RMB)	(RMB)
	(unaudited)	(audited)	(audited)
Revenue	0	0	0
Loss before taxation	1,431,000	6,275,000	5,402,000
Loss after taxation	1,431,000	6,275,000	5,402,000

The unaudited net asset value of the Disposed Company as at 30 April 2020 was approximately RMB32,387,000 (equivalent to approximately HK$34,978,000).

- 11 -

LETTER FROM THE BOARD

FINANCIAL EFFECT OF THE DISPOSAL AND THE USE OF PROCEEDS

Upon Completion, the Group is expected to record an unaudited gain on the Disposal of approximately RMB26,246,000 (equivalent to approximately HK$28,346,000). Such unaudited gain is estimated based on gross proceeds from the Disposal of RMB161,049,000 (equivalent to approximately HK$173,933,000) less the net asset value of the Disposal Group of approximately RMB32,387,000 (equivalent to approximately HK$34,978,000) as at 30 April 2020, and after deducting the Vendor's Loans of approximately RMB46,956,000 (equivalent to approximately HK$50,712,000), and the expenses directly attributable to the Disposal in aggregate of approximately RMB55,460,000 (equivalent to approximately HK$59,897,000), which includes the selling commission and expenses, the Project Debt II and the Project Debt III, and the maximum amount of compensation under the Third Parties Agreements. The actual amount of gain on the Disposal to be recorded by the Group will depend on the net asset value of the Disposed Company as at the Completion Date and the final amount to be settled for Project Debt II, Project Debt III and compensation under the Third Parities Agreements, therefore may be different from the amount mentioned above, and will be subject to review by the auditors of the Company.

Principal assets of the Disposed Company are the Land and the properties involved in the Project. As a result of the Disposal, such assets will be deconsolidated from the Group's consolidated statement of financial position upon Completion. On the assumption that Completion has taken place on 30 April 2020, the carrying amounts of the properties to be deducted from the total assets of the Group upon Completion are approximately RMB149,029,000. On the other hand, the Group is expected to receive the net proceeds from the Disposal which are estimated to be of approximately RMB87,961,000 (equivalent to approximately HK$94,998,000) and that will increase the Group's total assets by the same amount. Similarly, liabilities of the Disposed Company will be deconsolidated from the Group's consolidated statement of financial position upon Completion, it is expected that the total liabilities of the Group will be reduced by the carrying amounts of total liabilities of the Disposed Company at the date of Completion. The carrying amounts of total liabilities of the Disposed Company as at 30 April 2020 as shown in the Group's latest unaudited financial statements was approximately RMB119,773,000 (including bank loan of RMB45,000,000). Save for the aforesaid effects arising from the Disposal, the Disposal does not have other material effect on the earnings, assets and liabilities of the Group.

The Board intends to apply the net proceeds from the Disposal (being the gross proceeds less Project Debt II, Project Debt III, the maximum amount of compensation under the Third Parties Agreements together with the Payments to be returned and the other expenses directly attributable to the Disposal) of approximately RMB87,961,000 (equivalent to approximately HK$94,998,000) as general working capital of the Group and for potential acquisitions and investments as and when suitable opportunity arises.

- 12 -

LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF THE DISPOSAL

The principal activity of the Company is investment holding. The Group is principally engaged in (i) the provision of water supply and sewage treatment services; (ii) the construction of water supply and sewage treatment infrastructure; (iii) the exploitation and sale of new energy and renewable energy projects; and (iv) property investment and development.

The Land was acquired by the Disposed Company through public tender in 2016 and it was expected that the Project would provide the Group with new research and development facilities as well as additional office space, and also additional income stream from leasing or sale of the premises. The Project was originally expected to complete in or around June 2019. However, due to certain internal issues of the Contractor, the construction progress of the Project had been substantially delayed. The management of the Disposed Company decided to look for replacement contractor to continue with the Project. As mentioned in the annual report of the Company for the year ended 31 December 2019, the Project was under construction and was expected to complete in June 2020. However due to the outbreak of COVID-19, the construction progress is expected to be further delayed.

The Group expects that additional costs will be incurred from the prolonged development of the Project in relation to its operation and the project development. The additional operating costs is expected to be approximately RMB2,964,000 (equivalent to approximately HK$3,201,000) to be incurred from worker's wage, expenses for renting temporary facilities, water and electricity cost, security and cleaning expenses and office expenses. The additional project development costs is expected to be approximately RMB10,266,000 (equivalent to approximately HK$11,087,000) to be incurred from compensation for suspension in construction, expenses for replacement of the fence and facilities, renewal costs in relation to the Project, costs relating to the maintenance before resuming construction and the compensation under the Third Parties Agreements (the maximum compensation amount under the Third Parties Agreements of approximately RMB5,289,000 (equivalent to approximately HK$5,712,000) is accounted as an expense to the Disposal).

In view of the expected additional costs to be incurred for the prolonged development of the Project, the deteriorating financial results and the significant level of liabilities of the Disposed Company, as well as the expected gain on the Disposal as mentioned in the paragraph headed ''FINANCIAL EFFECT OF THE DISPOSAL AND THE USE OF PROCEEDS'' in this circular, the Company considers that the Disposal is an opportunity for the Company to realise its investments in the Disposal Group and strengthen the Group's liquidity. The net proceeds from the Disposal will make a positive contribution to the cashflow and financial position of the Group and it is expected that the net proceeds will be used by the Group as general working capital and for potential acquisitions and investments.

- 13 -

LETTER FROM THE BOARD

Taking into consideration of the aforesaid, the Directors consider that the terms and conditions of the Disposal Agreement are on normal commercial terms and are fair and reasonable and that the Disposal is in the interests of the Company and the Shareholders as a whole.

IMPLICATIONS UNDER THE LISTING RULES

As one or more of the percentage ratios exceeds 25% but is less than 75%, the Disposal constitutes a major transaction on the part of the Company under Chapter 14 of the Listing Rules and is subject to the reporting, announcement, circular and Shareholders' approval requirements under Chapter 14 of the Listing Rules.

An EGM will be convened and held for the Shareholders to consider and, if thought fit, to approve, the Disposal Agreement and the transactions contemplated thereunder. To the best of the Directors' knowledge, information and belief having made all reasonable enquiries, no Shareholders have any material interest in the Disposal or are required to abstain from voting at the EGM to approve the Disposal.

RECOMMENDATION

The Board considers that the terms of the Disposal Agreement and the transactions contemplated thereunder are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. The Directors recommend the Shareholders to vote in favour of the relevant resolution approving the Disposal and the transactions contemplated thereunder at the EGM.

ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the appendices to this circular.

Yours faithfully

For and on behalf of the Board

China Water Industry Group Limited

Mr. Lin Yue Hui

Chairman and Chief Executive Officer

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

FINANCIAL INFORMATION OF THE GROUP

Financial information of the Group for each of the three years ended 31 December 2017, 2018 and 2019 are disclosed in the annual reports of the Company for the years ended 31 December 2017, 2018 and 2019 respectively, and there was no qualified audit opinion expressed on the consolidated financial statements of the Group for the three years ended 31 December 2017, 2018 and 2019.

The said annual reports of the Group are published on both the website of the Stock Exchange (www.hkexnews.hk) and the website of the Company (http://www.chinawatergroup.com):

- 2017 annual report of the Group for the year ended 31 December 2017 published on
  27 April 2018 (pages 112 to 248) available on: https://www1.hkexnews.hk/listedco/listconews/sehk/2018/0427/ltn201804271390.pdf
- 2018 annual report of the Group for the year ended 31 December 2018 published on
  29 April 2019 (pages 123 to 280) available on: https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0429/ltn201904291056.pdf
- 2019 annual report of the Group for the year ended 31 December 2019 published on
  12 May 2020 (pages 133 to 280) available on: https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0512/2020051200906.pdf
INDEBTEDNESS STATEMENT
At the close of business on 31 May 2020, being the Latest Practicable Date for the purpose

of this indebtedness statement, the Group had total borrowings of approximately HK$1,126.4 million comprising the following:

interest-bearing,unsecured other loan of approximately HK$697.8 million;
interest-free,unsecured other loan of approximately HK$17.4 million;
interest-bearing,guaranteed, secured bank borrowings of approximately HK$131.4 million (note 1);
interest-bearing,guaranteed, unsecured bank borrowings of approximately HK$5.2 million;
guaranteed, secured lease liabilities of approximately HK$219 million; (note 2);
secured lease liabilities of approximately HK$12.3 million (note 3);
guaranteed, unsecured lease liabilities of approximately HK$32.4 million; and
lease labilities of approximately HK$10.9 million related to the leases which were previously classified as operating leases under HKAS 17.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Notes:

The secured bank borrowings were secured by (i) property plant and equipment of approximately HK$124.9 million; (ii) a contractual right to receive the revenue generated by certain subsidiaries of the Company; (iii) right-of-use-assets of approximately HK$65.7 million; and (iv) a 100% of equity interest of certain subsidiaries of the Company.
The lease liabilities were secured by (i) right-of-use assets of approximately HK$97.4 million; and (ii) a contractual right to receive the revenue generated by certain subsidiaries of the Company.
The lease liabilities were secured by (i) right-of-use assets of approximately HK$11.1 million; and (ii) a 100% of equity interest of certain subsidiaries of the Company

Save as referred to above, the Group did not have, any outstanding bank overdrafts, loans, debt securities, borrowings or other similar indebtedness, liabilities under acceptances or acceptance credits, debentures, mortgages, charges, finance lease, hire purchases commitments, which either guaranteed, unguaranteed, secured or unsecured, guarantees or other material contingent liabilities at the close of business on 31 May 2020.

III. WORKING CAPITAL

The Directors confirm that, after due and careful enquiry and taking into consideration the financial resources available to the Group, including banking facilities and other internal resources, the Group has sufficient working capital for at least the next 12 months commencing from the date of this circular.

IV. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, save for the additional costs to be incurred for the prolonged development of the Project as disclosed in page 13 of the Letter from the Board of this circular, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2019, the date to which the latest published audited consolidated financial statements of the Group were made up.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

FINANCIAL AND TRADING PROSPECTS

After experiencing the ''First Policy Year'' in 2015, the sky-rocketing industrial development in 2016, the critical point of the ''13th Five-year Plan'' in 2017 and the immense change of the environmental protection development from 2018 to 2019, the ''Decision'' of the Fourth Plenary Session of the 19th National People's Congress of the Communist Party expressly specified the ''implementation of the philosophy of lucid waters and lush mountains being invaluable assets, and persistence in the basic national policy of resources conservation and environmental protection''. 2019 was a critical year for ''determination to fight the battle of pollution prevention and treatment'' and also the year of formulating the ''framework of modern environmental treatment system''. Along with the transition from ''point'' to ''surface'' of environmental treatment and the progression from single project treatment to large scale project treatment, the mass monitoring layout of water, land, solid waste and exhaust was formed. In the new layout, the environmental protection industry entered an era of comprehensive and in-depth cultivation of policy from the era of policy seeding. At the National Financial Work Conference in 2019, it was explicitly mentioned to enhance the investment in environmental protection and put further focus on three environmental protection battles, namely blue sky, clear water and clean land. In the future, the investment in environmental protection will keep growing. Currently, the investment in the solid waste treatment industry accounts for less than 15% of the overall investment in the environmental industry in the PRC. Consolidating the development prospect of the solid waste industry, the industry and market prospects are still promising whether it is for demands for storage or demands for volume increase. Under the general strategy of national environmental treatment, the period where traditional water businesses are driven by capital scale is over. The construction of ''smart water business'' that aims to manage the maximum utilization of water and the effective usage of water is the most important goal for the current water management work. The return of water service era and the arrival of smart water business have a significant meaning for the actualization of sustainable urban development and enhancement of comprehensive urban competitiveness.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Business Review

The Group has the following major business activities during the year ended 31 December 2019:

Results of Water Sector Exceeding the Expected Growth while Business Development Entered a New Stage

Each company of the water sector maintained safe production throughout the year. As the Group unremittingly fulfil the responsibility of ensuring safe water for the use by residents, the Group conscientiously provides services at the front-line of urban water supply and sewage treatment. In 2019, all companies not only overachieved the performance target for the beginning of the year, but also continued to improve the service philosophy on the existing basis and enhanced the use of intelligent water services while implementing business diversification, thereby enabling the overall business of the water sector to enter a new stage. Yingtan Water Supply Group Co., Ltd. (''Yingtan Water Supply'') successfully took over Yingtan Railway Water Plant

（鷹潭鐵路水廠）and adopted a new safe water supply system, ''Three Plants Linkage''（三廠聯動）. With the total water supply volume increased from 7,000 tons/ day to 15,000 tons/day and the expansion items of water quality inspection stations being 69, the water quality inspection capability was enhanced effectively. The Group widely promoted NB-IOTsmart water meters, while cooperating with Hangzhou Guode Company*（杭州國德公司）to develop the ''one picture（一張圖）'' dispatching and controlling system. The upgrade of 6,000 smart water meters was completed, which basically actualized a full coverage of intellectualization of water meters below DN20. The upgrade of large diameter smart water meters with DN40 and above was initiated. It received a supporting fund of RMB1.04 million from the province 03 special projects. Yichun Water Industry Co., Ltd. (''Yichun Water'')（宜春水務集團有限公司）has successfully explored new areas of water supply business with substantial breakthroughs in the management of secondary water supply facilities, 11 small communities signing trust agreements and charging water fees from individual users for drinkable water. In September 2019, a water affairs group named ''Yichun Water Industry Group Co., Ltd.''（宜春水務集團）was established, with Yichun Water Industry Co., Ltd as the parent company. At the same time, in the ''Report on the Evaluation of the Business Environment of Yichun City and the Work Evaluation of 'Assessment of Authorities and Positions' by Enterprises and the Public in 2019''（《關於2019年宜春市營商環境評價暨企業、群眾「評機關、評崗位」工作評議情況的通報》）issued by the Office of the People's Government of Yichun City, it acquired the first place of the responsible units (service sector) for optimizing the business environment of the whole city. Yichun Fangke Sewage Treatment Company Limited* (''Yichun Fangke'') （宜春市方科污水處理有限公司）successfully signed a BOT concession right supplementary contract with the local government. The construction for upgrading, reconstruction and capacity expansion projects of the sewage treatment

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

plants in the town center for domestic sewage was completed smoothly, and was inspected and put into operation with sewage treatment volume of 140,000 tons/day and the effluent quality reaching the National Class IA Standard. Moreover, we applied for the national special environmental protection funds of RMB16 million and local special loans of RMB20 million in 2019 to alleviate the financial pressure on the construction of upgrading and capacity expansion projects and ensure the financial stability of the Company. The construction of engineering projects of Linyi Fenghuang Water Industry Co. Ltd. developed rapidly, attaining new highs in operating income. The major engineering and facility installment of Jinxiang sewage treatment projects of Jining City Haisheng Water Treatment Company Limited* (''Jining Haisheng'')（濟寧市海晟水務有限公司）had all been commissioned and were waiting for inspection. Jining City Haiyuan Water Treatment Company Ltd.* (''Jining Haiyuan'')（濟寧市海源水務有限公司）and Foshan City Gaoming Huaxin Sewage Treatment Company Ltd.* (''Foshan Gaoming'') （佛山市高明區華信污水處理有限公司）optimized the treatment techniques which could complete the sewage treatment with the same quality and quantity and lowered costs, and ensure the effluent can meet the quality standards 100%.

The results of new eco-energy segment reaching new highs and strong combination of strategic cooperation and internal driving force

The new eco-energy segment achieved transcendental development. The on-grid power generation of New China Water (Nanjing) Renewable Resources Investment Company Limited* (''New China Water (Nanjing)'')（新中水（南京）再生資源投資有限公司）and its subsidiaries (collectively, ''New China Water Group'') was 708 million kWh, representing a year-on-year growth of 24.32%, and the results reached a historical high. In the first half of the year, the development of 3 projects, namely, Lingao Hainan, Gaizhou Liaoning and Lianyuan Hunan, was completed, and 6 projects, namely Hainan Sanya, Hubei Anlu, Shandong Laizhou, Liaoning Haicheng, Dongyang Project and Guangzhou Huadu, commenced operation with newly added power generation totaling 18MW. As of the end of December 2019, New China Water Group had a total of 37 domestic waste landfill gas resource utilization projects with a total designed power generation installed capacity of 147.8MW, maintaining its industrial leading position.

In 2019, New China Water Group explored potentials internally and externally while reducing costs and enhancing efficiency. Financial leases such as Qianhai Xingbang（前海興邦）, Ping An Leasing（平安租賃）, Agricultural Bank of China, Jiangsu Financial Leasing（江蘇金融租賃）, Hitachi (China)（日立中國）, etc. were introduced and a strategic cooperation with BOC & UTRUST（中銀粵財）was reached, which provided positive capital cycle for the project development. In respect of internal management, point-to-point revitalization of idle equipment and promotion of unified procurement of frequently-used machine parts and fuel for the project were

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

carried out, and they established their own drilling teams and a pre-processing equipment system, which substantially reduced the expenditure for equipment of new construction projects, procurement unit cost and construction costs.

City-industryintegration segment leaping in terms of breakthrough and growth speed

As a cluster area for the space big data industry, Nanjing Space Big Data Industry Park（南京空間大數據產業園）project pioneered the introduction of park management service platform and actualized efficient and scientific management of the intellectual park through the informatized management on the platform. The subject constructions of projects in December all reached the cap with marketing and sales target achievement rate reaching 112% and return target achievement rate reaching 81.5%.

In addition, the businesses of Zhongkuang Construction Group Co. Ltd(''Zhongkuang Group''), Yingtan City Hongzhu Trading Co. Limited（''Hongzhu Trading''), and Yingtan Xiang Rui Property Limited*（''Xiang Rui Property'')（鷹潭祥瑞置業有限公司）under Yingtan Water Supply Group made steady progress with stable growth of business results throughout the year. In which, Zhongkuang Group changed from the original joint venture development model to self-operation model and acquired remarkable results. Xiang Rui Property successfully upgraded from Class 4 to Class 3 of Qualifications of Property Developers, laying a solid foundation for the real estate business of the company. In April 2019, Yingtan Water Supply Group invested in the development and construction of 2 real estate projects in Yugan County, namely Sanshui Guobinfu Project and Sanshui California Sunshine Project. In merely 8 months, the real estate business team in Yingtan demonstrated their efficiency and professionalism from land bidding and construction to sales and return. Sanshui Guobinfu Project and Sanshui California Sunshine Real Estate Project in Yugan County achieved the stage operation targets with satisfying sales results. As of the end of December, sell-through rate and return ratio both exceeded 70%.

Outlook and Future Plans

During Spring Festival in 2020, novel coronavirus pneumonia (COVID-19) epidemic spread rapidly across the Greater China area. The central government and the local government waged an epidemic prevention battle racing against time. The Ministry of Ecology and Environment successively published relevant policy documents in respond to this epidemic. The epidemic imposed a greater challenge on the international situation which was rather unpromising to begin with, and caused impact on the PRC. Enterprises in the environmental protection industry also encountered new challenges. To proactively response to the requirements of national and local government policies, the Group thoroughly implemented the epidemic prevention mechanism and adhered to the principle of ensuring

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

the safety and health of all employees to the maximum extend by adjusting the timeline of work resumption, making early preparation work for production resumption, reasonably arranging employees to take leaves or work from home, and endeavoring to safeguard the stable development of three major business segments, namely water service, new eco-energy and city-industry integration, in order to minimize the impact of the epidemic on the Group's business and thereby ensure normal operation. We believe that opportunities lie within the crisis. As long as we persist in our fundamental conception with unwavering determination, we can eventually triumph in this battle. To continue the Group's development, the following future plans will continue to be implemented:

1. Expanding along the upstream and downstream of industrial chain and moving towards the new era of the water supply industry

The water supply segment, as a public utility, is a policy-oriented industry. Currently, the development of water supply industry tends to be saturated, and the management system of water resources is strict. The industry has entered into a stage of stable development. Driven by the acceleration of urbanization, the total volume of sewage discharge has been increasing every year, and the sewage treatment industry has entered into a stage of rapid growth. In the face of challenges, the traditional operation model of water supply proactively expands along the upstream and downstream of industrial chain. The realization of strategic corporate transformation is the only way to move towards the new era of the water supply industry.

To strongly support the companies in the water supply segment to develop industries other than their principal activities, and to strengthen the construction of the reconstruction works of water supply pipeline network and related ancillary works for water supply and water connection projects;
To continue the implementation of smart water service, to apply a series of smart water supply facilities such as smart water meter, smart manhole cover, smart fire hydrant, smart pump room, etc., and to realize district metering of water supply and implementation of online business. In reliance on the ''One Picture（一張圖）'' dispatching system which was launched online, to actualize the establishment of the education base for smart water supply service jointly by Yingtan Water Supply and Sanchuan Wisdom（三川智慧）;
In recent years, under the State's ''One belt, One road'' initiative and the establishment of various cooperation mechanisms on the national level, we also identify the immense market potentials in the water supply industry. While keeping its foothold of existing smart water service technologies and maintaining international perspective, the Group will deeply explore the market demand for water treatment in the various countries along the route

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

and keep making innovations. To strive for its slice of ''cake'' in the trend of international production capacity cooperation, the Group utilized its extensive experience in management and implementation of overseas projects in order to develop in a win-win situation.

2. Consolidating existing business resources and steadily promoting overseas environmental protection business

In recent years, the overall direction of the relevant policies launched in the solid waste industry revolves around the ''three actions'' principle, namely, reduction of volume, recycling of resources and harmless treatment, which specify the direction of the acceleration of marketization. Currently, the volume of solid waste generation remains high, and there is still a relatively large gap for the treatment of general industrial solid wastes, hazardous wastes and municipal household wastes, and thus the future of the solid waste industry will remain prosperous.

Consolidating and developing the existing domestic business resources and steadily promoting overseas environmental protection business;
Keeping its foothold in environmental protection and explore other businesses in the environmental protection industry in order to expand its scope of business;
Broadening the financing channels while introducing new strategic investments.

3. Sustaining city-industry integration development and exploring the value of urban spaces

In the present, the city-industry integration model, which takes the city as the

carrier and industry as the safeguarding basis, has gained growing concern. City- industry integration does not only drive the value enhancement of urban spaces but also provides new ideas for coordination development of industry, city and residents.

To speed up subsequent business promotion and sales works of the Nanjing Space Big Data Industry Park project;
By gathering its institutional advantages, Zhongkuang Group devotes great effort to develop markets in Guangdong-HongKong-Macau Greater Bay Area. It plans to undertake at least 2 influential engineering projects in Nanchang and Northeast Jiangxi area in order to achieve breakthrough progress; build a team of outstanding contractors, project managers and quality suppliers and formulate preferential policies for joining the team in order to attract more construction talents to join the Company; continue to

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

strengthen the development of self-employed model to carry out the project co-investment model for the core management personnel of the Company in order to renew and expand the ways of self-employment and achieve flexibility and diversity;

3. To complete the construction of Yugan Sanshui Guobinfu Project and Sanshui California Sunshine Project, to actualize the refund delivery of all properties and shops; to facilitate the smooth progress of the construction of Sanshui（三水金麟府）Project. Based on the successful examples of real estate projects in Yugan, to foster the development and investments of real estate projects in surrounding counties and towns in order to stimulate the vitality of urban industries, enhance city function and improve living environment.

Looking forward to 2020, the nationwide suspension of work and production due to the COVID-19 outbreak has inevitably caused delays to some extent in the Group's launch of new properties and its commencement and completion plans. In view of tremendous risks inside and outside China, increased external uncertainties and destabilising factors, there was downward pressure on the property market. However, with the support of reasonable monetary easing and proactive fiscal policies by the Chinese government, it is believed that the great resilience in China's economy will enable China to step out of the trough caused by the COVID-19. Pursuant to the government policy, the Group has adjusted its project launch strategy, shifting away from centralized sales launch model. At the same time, the Group has made proactive preparations for adversity in light of the current conditions by organizing multiple forms of online marketing, including live streaming, proprietary sales platform wechat mini program, mobile app, and major third-party platforms to facilitate its consumers' housing transaction. When the impact of the COVID-19 is gradually eliminated according to the current good trend, it is expected that the property market should stabilize in 2020.

4. Actively explore more financing channels for further expansion Group's core businesses

To ensure the sustainable development of the Group and fulfil the capital demands during the development, the Group took the initiative to expand its financing channels and enhanced its funding capability including but not limited to issue of new bonds, issue of new shares, loans financing with various domestic and international commercial banks so as to make well preparation for the future development of our projects. The Group managed to maintain a healthy financial condition with a reasonable gearing ratio.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The Group will always be committed to achieving its business philosophy of ''gaining government confidence, citizen satisfaction, shareholders' recognition and staff contentment''. In 2020, there is no doubt a challenging year but with the Group's solid financial position and diversified income streams, the Group is full of confidence to overcome difficulties and steadily develop its three major businesses in water supply, new eco-energy and cityindustry integration. Meanwhile, it will proactively develop other businesses in the upstream and downstream of water supply and environmental protection industries as well as overseas businesses in order to optimize its strength and expand its scale and to break new ground for the Group. The Board will continue to adopt a prudent approach in implementing the Group's stated strategies for the benefit of the Group and its Shareholders.

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APPENDIX II

PROPERTY VALUATION REPORT

The following is the text of a letter and a valuation certificate prepared for the purpose of incorporation in this circular received from AVISTA Valuation Advisory Limited, an independent valuer, in connection with its valuation as at 30 April 2020 of the property interests held by the Group.

23rd Floor, Siu On Centre, No. 188 Lockhart Road,

Wan Chai, Hong Kong

: (852) 3702 7338

: (852) 3914 6388

24 July 2020

The Board of Directors

China Water Industry Group Limited

Room 1207, 12/F, West Tower, Shun Tak Centre,

168-200 Connaught Road Central,

Sheung Wan, Hong Kong

Dear Sirs/Madams,

INSTRUCTIONS

In accordance with the instructions of China Water Industry Group Limited (the ''Company'') and its subsidiaries (hereinafter together referred to as the ''Group'') for us to carry out the valuation of the property interests located in the People's Republic of China (the ''PRC'') held by the Group. We confirm that we have carried out inspection, made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the Market Value of the property interests as at 30 April 2020 (the ''Valuation Date'').

VALUATION STANDARDS

In valuing the property interests, we have complied with all the requirements set out in Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities issued by The Stock Exchange of Hong Kong Limited (the ''Listing Rules''), the HKIS Valuation Standards (2017 Edition) published by the Hong Kong Institute of Surveyors and the International Valuation Standards published from time to time by the International Valuation Standards Council.

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APPENDIX II

PROPERTY VALUATION REPORT

BASIS OF VALUATION

Our valuation is carried out on a Market Value basis, which is defined by the Hong Kong Institute of Surveyors as ''the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion''.

VALUATION ASSUMPTIONS

Our valuation of the property excludes an estimated price inflated or deflated by special terms or circumstances such as atypical financing, sale and leaseback arrangement, special considerations or concessions granted by anyone associated with the sale, or any element of special value or costs of sale and purchase or offset for any associated taxes.

No allowance has been made in our report for any charges, mortgages or amounts owing on any of the property interests valued nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the properties are free from encumbrances, restrictions and outgoings of an onerous nature, which could affect their values.

In the course of our valuation of the property in the PRC, we have assumed that transferable land use rights in respect of the property for a specific term at nominal annual land use fees have been granted and that any premium has already been fully settled. We have relied on the advice given by the Group regarding the title to the property. For the purpose of our valuation, we have assumed that the grantee has an enforceable title to the property.

In valuing the property in the PRC, we have assumed that the grantees or the users of the property have free and uninterrupted rights to use or to assign the property for the whole of the unexpired term as granted.

Unless noted in the report, vacant possession is assumed for the property concerned.

Moreover, we have assumed that the design and construction of the properties are/will be in compliance with the local planning regulations and requirements and had been/would have been duly examined and approved by the relevant authorities.

Continued uses assumes the properties will be used for the purposes for which the properties are designed and built, or to which they are currently adapted. The valuation on the property in continued uses does not represent the amount that might be realised from piecemeal disposition of the property in the open market.

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APPENDIX II

PROPERTY VALUATION REPORT

No environmental impact study has been ordered or made. Full compliance with applicable national, provincial and local environmental regulations and laws is assumed. Moreover, it is assumed that all required licences, consents or other legislative or administrative authority from any local, provincial or national government or private entity or organisation either have been or can be obtained or renewed for any use which the report covers.

It is also assumed that all applicable zoning and use regulations and restrictions have been complied with unless nonconformity has been stated, defined and considered in the valuation report. In addition, it is assumed that the utilisation of the land and improvements are within the boundaries of the properties described and that no encroachment or trespass exists, unless noted in the report.

We have further assumed that the properties were not transferred or involved in any contentious or non-contentious dispute as at the valuation date. We have also assumed that there was not any material change of the properties in between dates of our inspection and the valuation date.

VALUATION METHODOLOGY

In the course of our valuation, unless otherwise stated, we have valued the properties in their designated uses with the understanding that the properties will be used as such (hereafter referred to as ''continued uses'').

In valuing the property interests, the property is currently under development, we have assumed that they will be developed and completed in accordance with the latest development proposal provided to us by the Group. We have assumed that all consents, approvals and licenses from relevant government authorities for the development proposals have been obtained without onerous conditions or delays. In arriving at our opinion of value, we have adopted the market approach by making reference to comparable sales evidence as available in the relevant market and have also taken into account the accrued construction cost and professional fees relevant to the stage of construction as at the date of valuation and the reminder of cost and fees that expected to be incurred for completing the development.

TITLE INVESTIGATION

We have been provided with copies of documents in relation to the title of the property interests in the PRC. Where possible, we have examined the original documents to verify the exiting title to the property interest in the PRC and any material encumbrance that might be attached to the property interests or any tenancy amendment. All documents have been used for reference only and all dimensions, measurements and areas are approximate. In the course of our valuation, we have relied considerably on the legal opinion given by the Company's PRC legal adviser - Dentons, concerning the validity of title of the property interests in the PRC.

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APPENDIX II

PROPERTY VALUATION REPORT

SITE INVESTIGATION

We have inspected the exteriors and, where possible, the interior of the Property. The site inspection was carried out on 16 January 2020 by Greivis Sze (Assistant Manager, APC Candidate of RICS). However, we have not carried out an investigation on site to determine the suitability of ground conditions and services for any development thereon. Our valuation has been prepared on the assumption that these aspects are satisfactory. We have further assumed that there is no significant pollution or contamination in the locality which may affect any future developments.

Moreover, no structural surveys have been undertaken, but in the course of our inspection, we did not note any serious defects. We are not, however, able to report whether the Property is free of rot, infestation or any other structural defects. No tests were carried out on any of the utility services.

SOURCE OF INFORMATION

Unless otherwise stated, we shall rely to a considerable extent on the information provided to us by the Company or the legal or other professional advisers on such matters as statutory notices, planning approvals, zoning, easements, tenures, completion date of buildings, development proposal, identification of properties, particulars of occupation, site areas, floor areas, matters relating to tenure, tenancies and all other relevant matters.

We have had no reason to doubt the truth and accuracy of the information provided to us by the Company. We have also sought confirmation from the Company that no material factors have been omitted from the information supplied. We consider that we have been provided with sufficient information to reach an informed view and we have no reason to suspect that any material information has been withheld.

We have not carried out detailed measurements to verify the correctness of the areas in respect of the property but have assumed that the areas shown on the title documents and official site plans handed to us are correct. All documents and contracts have been used as reference only and all dimensions, measurements and areas are approximations. No on-site measurement has been taken.

LIMITING CONDITION

Wherever the content of this report is extracted and translated from the relevant documents supplied in Chinese context and there are discrepancies in wordings, those parts of the original documents will take prevalent.

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APPENDIX II

PROPERTY VALUATION REPORT

CURRENCY

Unless otherwise stated, all monetary amounts stated in this report are in Renminbi (RMB).

Our valuations are summarized below and the valuation certificates are attached.

Yours faithfully,

For and on behalf of

AVISTA Valuation Advisory Limited

Sr Oswald W Y Au

MHKIS(GP) AAPI MSc(RE)

Registered Professional Surveyor (GP)

Director

Note: Mr. Oswald W Y Au holds a Master's Degree of Science in Real Estate from the University of Hong Kong. He is also a member of Hong Kong Institute of Surveyors (General Practice) and Associate Member of Australian Property Institute. In addition, he is a Registered Professional Surveyor (General Practice) registered with Surveyors Registration Board. He has over 15 years' experience in the valuation of properties including Hong Kong, the PRC, the U.S., Canada, East and Southeast Asia including Singapore, Japan and Korea.

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APPENDIX II

PROPERTY VALUATION REPORT

VALUATION CERTIFICATE

Property interest held by the Group for development in the PRC

						Market value in
					Particulars of	existing state as at
No.	Property	Description and tenure			occupancy	30 April 2020
						RMB
1.	''Huizhou Swan Blue	The property comprises 1 parcel of land with a	The property is	192,243,000
	Valley Wisdom Square''	site area of approximately 30,544.24 sq.m. and	currently under
	(''惠州鴻鵠藍谷智慧廣	various blocks of scientific research buildings	construction as at	(100% interest
	場'') located at Huinanda	and office buildings which are currently being	the valuation date.	attributable to the
	Road, Sandong Town,	constructed thereon.				Target Company:
	Huizhou City, Guangdong					192,243,000)
	Province, the PRC	The development is scheduled to be completed
		in December 2021. Upon completion, the
		development will have a total gross floor area
		of approximately 54,794.10 sq.m. and the
		breakdowns are as following:
			Gross
		Usage	Floor Area
			(sq.m.)
		Scientific Research	39,587.50
		Office Buildings	5,463.7
		Car Parking Spaces	9,742.90
		Total:	54,794.10

As advised by the Group, the total construction cost is estimated to be approximately RMB206,000,000 of which RMB128,450,000 had been paid as at the date of valuation.

The property is located at Huizhou City, with approximately 26km to Huizhou Train station and 27km to Huizhou Pingtan Airport.

The land use rights of the property have been granted for a term expiring on 30 August 2066 for scientific research use.

- 30 -

APPENDIX II

PROPERTY VALUATION REPORT

Notes:

1. Pursuant to the State-owned Land Use Rights Grant Contract - No. 441301-2016-000014 dated 30 June 2016 issued by the Land and Resources Bureau of Huizhou City, the land use rights of a parcel of land with a site area of approximately 35,725 sq.m. of which the grant site area of approximately 30,544.2 sq.m. has been granted to Huizhou Swan Heng Chang Property Development Company Limited (''惠州鴻鵠恒昌置業有限公司'') for a land use right term of 50 years for scientific research use at a total land premium of approximately RMB25,900,000.

As revealed from the aforesaid State-owned Land Use Rights Grant Contract, the property is subject to the following material development conditions:

Permitted Gross Floor Area:	42,870	sq.m.
Plot Ratio:	≦1.2
Site Coverage:	≦35%

Pursuant to the Real Estate Ownership Certificate - Yue (2016) Hui Zhou Shi Bu Dong Quan Di No. 1001583 dated 6 September 2016 with a total site area of approximately 30,544.24 sq.m. has been vested to Huizhou Swan Heng Chang Property Development Company Limited, for a term of approximately 50 years for scientific research use.
Pursuant to the Construction Land Planning Permit - Di Zi Di No. 441302 (2016) 10122 dated 10 October 2016 in favour of Huizhou Swan Heng Chang Property Development Company Limited, permission towards the planning of a parcel of land with a total site area of approximately 35,725 sq.m. is obtained.
Pursuant 22 Construction Works Planning Permits in favour of Huizhou Swan Heng Chang Property Development Company Limited, the development with total gross floor area of approximately 54,794.10 sq.m. have been approved for the construction of scientific research buildings, office buildings and car parking spaces & utilities and the details are shown as below:

				Gross Floor
No.	Construction Works Planning Permit No.	Area	Date of Issue
				(sq.m.)
a.	Jian Zi Di No. 441302 (2017) 10324	5,819.7	21-Jun-17
b.	Jian Zi Di No. 441302 (2017) 10344	3,923.2	21-Jun-17
c.	Jian Zi Di No. 441302 (2018) 20042	7,484	19-Apr-18
d.	Jian Zi Di No. 441302 (2018) 20043	24,712.70	19-Apr-18
e.	Jian Zi Di No. 441302 (2018) 20044	7,390.8	19-Apr-18
f.	Jian Zi Di No. 441302 (2018) 20045	247.1	19-Apr-18
g.	Jian Zi Di No. 441302 (2018) 20046	247.1	19-Apr-18
h.	Jian Zi Di No. 441302 (2018) 20047	247.1	19-Apr-18
i.	Jian Zi Di No. 441302 (2018) 20048	247.1	20-Apr-18
j.	Jian Zi Di No. 441302 (2018) 20049	247.1	20-Apr-18
k.	Jian Zi Di No. 441302 (2018) 20050	373.4	20-Apr-18
l.	Jian Zi Di No. 441302	(2018)	20051	373.4	20-Apr-18
m.	Jian Zi Di No. 441302	(2018)	20052	373.4	20-Apr-18
n.	Jian Zi Di No. 441302	(2018)	20053	373.4	20-Apr-18
o.	Jian Zi Di No. 441302	(2018)	20054	373.4	20-Apr-18

- 31 -

APPENDIX II			PROPERTY VALUATION REPORT
				Gross Floor
No.	Construction Works Planning Permit No.	Area	Date of Issue
				(sq.m.)
p.	Jian Zi Di No. 441302 (2018) 20055	373.4	20-Apr-18
q.	Jian Zi Di No. 441302 (2018) 20056	373.4	20-Apr-18
r.	Jian Zi Di No. 441302 (2018) 20057	373.4	20-Apr-18
s.	Jian Zi Di No. 441302	(2018)	20058	373.4		20-Apr-18
t.	Jian Zi Di No. 441302	(2018)	20059	247.1	20-Apr-18
u.	Jian Zi Di No. 441302	(2018)	20060	247.1	20-Apr-18
v.	Jian Zi Di No. 441302	(2018)	20061	373.4	20-Apr-18
			Total:	54,794.10

Pursuant to the Construction Works Commencement Permit - No. 441302201708150101 dated 15 August 2017 in favour of Huizhou Swan Heng Chang Property Development Company Limited, permission by the relevant local authority has been given to commence the construction work with a total gross floor area of approximately 54,793.5 sq.m. for the development of scientific research buildings, office buildings and car parking spaces & utilities.
For reference purpose, we are of the opinion that the estimated capital value of the property stated above as at the valuation date would be RMB349,991,000, assuming the property has been completed and could be freely transferred in the market.
We have been provided with a legal opinion regarding the property interest by the Company's PRC legal advisers, which contains, inter alia, the following:
1. The Company is legally obtained the Real Estate Ownership Certificate, Construction Land Planning Permit, Construction Works Planning Permits and Construction Works Commencement Permit.; and
2. The property was pledged.
In our valuation, we have made reference to some asking price references of comparable nearby development. We have adopted the range of unit rates between RMB 8,000 to RMB 13,000 per sq.m. The unit rates assumed by us are consistent with the said price reference. Due adjustments to the unit rates of those price reference have been considered to reflect factors including but not limited to time, location and size in arriving at the key assumptions.
A summary of major certificates/licenses is shown as follows:

a.	Real Estate Ownership Certificate	Yes
b.	Construction Land Planning Permit	Yes
c.	Construction Works Planning Permit	Yes
d.	Construction Works Commencement Permit	Yes

- 32 -

APPENDIX III

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors, having made all reasonable enquires, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS

Directors' and chief executive's interests and short positions in the securities of the Company and its associated corporations

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executive of the Company in the Shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which

were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers of the Listing Rules, to be notified to the Company and the Stock Exchange were as follows:

Interests in Shares

				Approximate
				percentage of
Name of Directors/			No. of Shares	issued voting
Chief Executive	Nature of interest	Position	interested	Shares
				(Note 1)
Mr. Lin Yue Hui	Beneficial owner	Long	5,000,000	0.31%
Ms. Deng Xiao Ting	Beneficial owner	Long	3,000,000	0.19%
Ms. Chu Yin Yin,	Beneficial owner	Long	743,200	0.05%
Georgiana

- 33 -

APPENDIX III

GENERAL INFORMATION

Save as disclosed above, as at Latest Practicable Date, none of the Directors or Chief Executive of the Company had any interest or short position in any Shares, underlying shares or debenture of the Company or any of its associated corporations (within meaning of the SFO) which (a) were required to be notified to the Company and the Stock Exchange pursuant to divisions 7 and 8 of part xv of the SFO (including interests and short positions which directors have taken or deemed to have under such provisions of SFO) or (b) were required pursuant to section 352 of the SFO, to be entered in the register referred to therein; or which (c) were required, pursuant to the Model Code to be notified to Company and the Stock Exchange.

Substantial shareholder's and other persons' interests or short position in the securities of the Company and its associated corporations

As at the Latest Practicable Date, the persons (other than a Director or chief executive of the Company) who had, or were deemed to have, interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO as recorded in the register required to be kept by the Company pursuant to section 336 of the SFO were as follows:

Interests in Shares

				Approximate
				percentage of
			No. of Shares	issued voting
Name of Shareholder	Nature of interest	Position	interested	Shares
				(Note 1)
Honghu Capital Co. Ltd.	Beneficial owner	Long	277,788,000	17.40%
			(Note 1)
Step Wide Investment	Beneficial owner	Long	160,000,000	10.02%
Limited			(Note 2)

Notes:

These Shares are held by Honghu Capital Co. Ltd. (''Honghu Capital'') which Mr. Deng Jue Jie (''Mr. Deng'') is the beneficial owner. Mr. Deng is deemed to be interested in Shares held by Honghu Capital by virtues of the SFO.
These Shares are held by Step Wide Investment Limited (''Step Wide'') which Mr. Wong Hin Shek (''Mr. Wong'') is the beneficial owner. Mr. Wong is deemed to be interested in Shares held by Step Wide by virtues of the SFO.

- 34 -

APPENDIX III

GENERAL INFORMATION

Save as disclosed above, as at the Latest Practicable Date, the Company has not been notified by any person (other than a Director or chief executive of the Company) had any interests or short positions in the Shares or underlying shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO as recorded in the register required to be kept by the Company pursuant to section 336 of the SFO.

3. DIRECTORS' SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had a service contract or a proposed service contract with any member of the Group which is not expiring or determinable by the employer within one year without the payment of compensation (other than statutory compensation).

4. INTERESTS IN ASSETS, CONTRACTS OR ARRANGEMENTS

As at the Latest Practicable Date, none of the Directors has, or had, any direct or indirect interest in any assets which had been or are proposed to be acquired, disposed of by or leased to, any member of the Group since 31 December 2019, being the date to which the latest published audited financial statements of the Company were made up.

None of the Directors is materially interested in any contract or arrangement subsisting at the Latest Practicable Date which is significant in relation to the business of the Group.

5. MATERIAL CONTRACTS

The following contracts have been entered into by the Group (not being contracts entered into in the ordinary course of business) within the two years preceding the date of this circular which is or may be material:

the Disposal Agreement dated 10 June 2020 and entered into among the Vendor, the Purchaser and the Disposed Company in relation to the sale and purchase of the Sale Capital and the settlement arrangements of the Loan, the Vendor's Loans, the Project Debts and the Construction Contracts Debts;

- 35 -

APPENDIX III

GENERAL INFORMATION

the joint venture agreement dated 18 May 2020 entered into between 鷹潭祥瑞置業有限公司 (Yingtan Xiang Rui Property Limited*) (''Yingtan Property'') and 鷹潭三匯貿易有限公司 (Yingtan Sanhui Trading Company Limited*) (''Yingtan Sanhui'') in relation to the formation of an joint venture enterprise in the PRC and will be holding by Yingtan Property as to 49% and by Yingtan Sanhui as to 51%. The total investment amount would not exceed RMB125 million (equivalent to approximately HK$137 million) and will be contributed by Yingtan Property and Yingtan Sanhui pursuant to their respective equity interest in the JV Company.
the investment agreement and the profit guarantee Agreement dated 27 December 2019 entered into between the Company, China Water Industry (HK) Limited (the ''Current Shareholder''), New China Water (Nanjing) Renewable Resources Investment Company Limited*（新中水（南京）再生資源投資有限公司）(the ''Target Company''), and SZQH Energy-saving Environmental Protection investment fund management Co., Ltd.*（深圳前海粵財節能環保投資基金管理有限公司）(the ''Investor'') (as the case maybe) pursuant to which the Investor will invest RMB60 million to the Target Company and in return the registered capital of the Target Company will increase from US$82.88 million to US$86.1952 million. A profit guarantee will also be provided by the Company and Current Shareholder for the three years ending 31 December 2019, 2020 and 2021.
the joint venture agreement dated 23 December 2019 entered into between Yingtan Property and Yingtan Sanhao Trading Company Limited*（鷹潭三浩貿易有限公司）, Mr. Zhang Qing Bang*（章青邦）and Mr. Li Wei Han*（李衛漢）(collectively known as ''JV Partners'') pursuant to which Yingtan Property and the JV Partners have agreed to establish the joint venture company (''JV Company'') for the cooperation of carrying out the Sanshui Jinlin House Project (the ''Property Development Project''). The JV Company will be owned as to 40% by Yingtan Property and in aggregate as to 60% by the JV Partners. Pursuant to the terms of the JV Agreement, the total investment amount would be RMB309 million (equivalent to approximately HK$346.08 million) and will be contributed by Yingtan Property and the JV Partners pursuant to their respective equity interest in the JV Company.

- 36 -

APPENDIX III

GENERAL INFORMATION

the supplemental agreement dated 28 August 2019 entered into bewteen Billion City Investments Limited (''Billion City'') (the ''Vendor''), the Company as Guarantor and Guangdong Water Group (H.K.) Limited (the ''Purchaser'') in relation to the inclusion of the irrevocable undertaking and amendment of settlement consideration in the sale and purchase agreement (the ''SPA'') dated 8 June 2018 for the disposal of 30% of the issued share capital of the Super Sino Investment Limited (the ''Target Company'') and the sale loan due to the Vendor by the Target Company.
the co-operation agreement dated 19 July 2019 entered into among Yingtan Sanrun Consultancy Company Limited*（鷹潭市三潤諮詢有限公司）(the ''Investor''), Jiangxi Hanhe Corporate Development Company Limited*（江西漢和企業發展有限公司）(the
''Project Company'') and Yingtan Hongzhou Trading Co., Ltd.*（鷹潭市宏築貿易有限公司）(''Yingtan Hongzhu'') in relation to the development of the Sanshui Guobinfu project*（三水•國賓府項目）(the ''Property Development Project''), which situated on a piece of land located at 江西省上饒市余干縣棚戶區改造玉亭大道以東,世紀大道以北B18-02 (East of Gai Zao Yu Ting Avenue, north of Century Avenue B18-02, Shanty Town, Yugan County, Shangrao City, Jiangxi Province*) (Parcel No. DEI2019035), with a total site area of approximately 30,742 square meters (the ''Land''). Pursuant to which the Investor will invest RMB49.5 million (or approximately HK$56.4 million) to the Project Company and would then be interested in 30% of the risk and return of the Property Development Project;
a second supplemental agreement dated 28 June 2019 entered into between Billion City, the Company and Guangdong Water Group (HK) Limited, pursuant to which the parties agreed to further extend the long stop date in the SPA to 31 August 2019.
the Land Use Rights Grant Contract dated 3 June 2019 entered into bewteen Yingtan Hongzhu and Yugan County Natural Resources Bureau for the acquisition of the land use rights of the Land at a total consideration of RMB300.08 million (equivalent to approximately HK$351.09 million) as a result of successfully winning the bid of the land use rights of the Land on 29 April 2019.
the auction confirmation letter（國有建設用地使用權成交確認書）dated 29 April 2019 entered into between Yingtan Hongzhu and the Yugan County Land Resources Trade Service Centre to confirm the acquisition of a land use rights of the Land for a total consideration of RMB302.20 million (equivalent to approximately HK$353.57 million);

- 37 -

APPENDIX III

GENERAL INFORMATION

the agreement dated 28 February 2019 entered into between the Yingtan Municipal Housing and Urban-Rural Development Bureau*（鷹潭市住房和城鄉建設局）(the
''Development Bureau'') and Yingtan Water Supply Co. Ltd*（鷹潭市供水有限公司）
(''Yingtan Water Supply'') in relation to the construction of the water intake facilities, pursuant to which the Development Bureau will procure the construction of the water intake facilities and Yingtan Water Supply shall acquire from the Development Bureau the water intake facilities by installment payments in cash over eight years' time, commencing from the subsequent month after water connection. The cost of construction shall not exceed RMB420.0 million (equivalent to HK$491.4 million). The water intake facilities comprised of water supply pipelines and its ancillary facilities for i) the section from the Huaqiao Reservoir Luotang River Water Distribution Plant*（花橋水庫羅塘河配水站）to the intake of the Jiangnan Water Plant*（江南水廠）, and ii) the intake section of the Xiabu Water Plant*（夏埠水廠） and the renovation of the Guiye Water Intake Pumping Station*（貴冶取水泵房泵站）.
the supplemental agreement dated 17 January 2019 entered into between the Company and Prior Securities Limited (the ''Placing Agent'') pursuant to which the parties have agreed to, among others, extend the placing period from the date of placing agreement dated 18 January 2018 from 365 days to 730 days.
the placing agreement dated 15 January 2019 entered into between the Company and the Placing Agent in relation to the placing of (i) the one-year 5% coupon unlisted bonds issued by the Company and (ii) the two-year 5.5% coupon unlisted bonds issued by the Company, all of which are unlisted with the combined aggregate principal amount of up to HK$200,000,000, in multiple tranches to be placed during the placing period.
the supplemental agreement dated 10 January 2019 entered into between the Company and the Placing Agent for the extension of a period of 365 days from the date of the placing agreement dated 11 January 2018 to 730 days in relation to the placing of 6% coupon unlisted bonds to be issued by the Company in an aggregate principal amount of up to HK$100,000,000.
the sale and purchase agreement dated 6 December 2018 entered into between the Blue Mountain Hong Kong Group Limited, an indirect wholly-owned subsidiary of the Company (the ''Vendor'') and the Jinan Water Group Co., Ltd*（濟南水務集團有限公司）(the ''Purchaser''), pursuant to which the Vendor has conditionally agreed to sell and the Purchaser has conditionally agreed to purchase 35% of the equity interest in the Jinan Hongquan Water Production Co., Ltd（. 濟南泓泉制水有限公司）at a consideration of RMB70.8 million (equivalent to approximately HK$80.0 million).

- 38 -

APPENDIX III

GENERAL INFORMATION

the extension agreement dated 30 November 2018 entered into between the Company and Mayfair & Ayers Financial Group Limited as a placing agent in relation to the extension of the placing period of the placing of 6.0% coupon unlisted bonds to be issued by the Company in an aggregate principal amount of not less than HK$100,000,000, to 30 May 2019;
the supplemental agreement dated 13 November 2018 entered into between Billion City, Guangdong Water Group (H.K.) Limited and the Company in relation to the extension of the long stop date of the SPA from 18 November 2018 to 30 June 2019;

(xvii)the construction agreements dated 24 October 2018 entered into between New China Water (Nanjing) Energy Company Limited*（新中水（南京）能源有限公司）, New China Water (Nanjing) Carbon Company Limited*（新中水（南京）碳能有限公司）and Jinling Construction Group of Jiangsu Province Co. Ltd（. 江蘇省金陵建工集團有限公司）(the ''Contractor'') in relation to the construction of the premises (including but not limited to 6 blocks of research and development centers and a underground car parks) with a total gross floor area of 72,825.3 sq.m in Nanjing, the PRC at construction cost of RMB180 million (or approximately HK$203.4 million); and

the head of agreement (the ''HOA'') dated 9 July 2018 entered into between New China Water (Nanjing) (the ''Intended Vendor''), an indirect wholly-owned subsidiary of the Company, and Kelin Environmental Protection Equipment, Inc.*（科林環保裝備股份有限公司）(the ''Intended Purchaser''), pursuant to which the Intended Vendor intends to sell the entire equity interests of 14 companies principally engaged in landfill gas comprehensive utilization projects (the ''Target Companies'') to the Intended Purchaser in return for cash consideration, subject to due diligence review having been conducted on the Target Companies by the Intended Purchaser.

6. EXPERT AND CONSENT

The following is the qualification of the expert who had given its opinion and advice which

are contained in this circular:

Name	Qualification
AVISTA Valuation Advisory Limited	An independent professional property valuer
(''AVISTA'')

- 39 -

APPENDIX III

GENERAL INFORMATION

As at the Latest Practicable Date, AVISTA had no shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group. AVISTA has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and references to its name in the form and context in which they respectively appear.

As at the Latest Practicable Date, AVISTA did not have any direct or indirect interest in any assets which have been, since 31 December 2019 (being the date to which the latest published audited accounts of the Company were made up), acquired or disposed of by or leased to or were proposed to be acquired or disposed of by or leased to any member of the Group.

7. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors and their respective close associates had any interest in a business which competes or is likely to compete, either directly or indirectly, with the business of the Group.

8. LITIGATIONS AND ARBITRATION

Swift Surplus Holdings Limited, an indirect wholly-owned subsidiary of the Company

On 21 August 2012, the Company and its subsidiary of Swift Surplus Holdings Limited (''Swift Surplus'') (collectively as the ''Lenders'') entered into repayment agreements (the ''Repayment Agreements'') with the Sihui Sewage Treatment Co. Ltd.*（四會市城市污水處理有限公司）and Top Vision Management Limited (''Top Vision'') (collectively as the ''Borrowers'') together with their respective guarantors, pursuant to which, the Borrowers shall repay to the Lenders the loan receivables of approximately HK$58.43 million together with interest accrued thereon. Despite the Company several requests and demands, Top Vision failed to repay HK$53.43 million (the ''Remaining Loan Receivables''). On 14 May 2013, the Company instructed its legal counsel to file the writ of summons to the High Court of Hong Kong Special Administrative Region (the ''High Court'') to recover the Remaining Loan Receivables from Top Vision. On 25 June 2013, the High Court adjudged a final judgment that Top Vision shall pay the Remaining Loan Receivables to Swift Surplus. Top Vision has not performed the repayment obligation under the judgment issued by the High Court. The Company cannot locate any asset of Top Vision in Hong Kong. On 20 August 2014, a petition was filed by Galaxaco Reservoir Holdings Limited to wind up Top Vision, one of the creditors of Top Vision. Top Vision has now been wound up by the High Court by a Winding up Order under Companies Winding-up Proceedings No.157/2014 and appointed SHINEWING Specialist Advisory Services Limited as liquidators.

- 40 -

APPENDIX III

GENERAL INFORMATION

In 2016, the Company instructed the legal counsel to institute arbitral proceedings against the Borrowers and their respective guarantors by filing the notices of Arbitration to Hong Kong International Arbitration Centre (''HKIAC''). As the major assets owned by the subsidiaries of Top Vision are located in Guangdong Province, the PRC, the Company had undertaken recovery actions including but not limited to legal actions taken in PRC to collect the Remaining Loan Receivables. On 28 June 2019, Sihui City People's Court adjudged the final judgment to execute in Mainland China for the recovering the outstanding balance and the underlying interest from Top Vision and to freeze the entire equity interest held by Top Vision on Sihui Sewage till July 2022. On 16 March 2020 the arbitrator of HKIAC made an arbitration award that each guarantor should bear joint and several liabilities to repay the principal amount of HK$17.31 million together with interest accrued thereon to Swift Surplus. The PRC legal proceeding is still in progress.

Guangzhou Hyde Environmental Protection Technology Co., Ltd., an indirect wholly owned subsidiary of the Company

Guangzhou Hyde Environmental Protection Technology Co. Ltd.*（廣州市海德環保科技有限公司）(''Guangzhou Hyde'') (an indirect wholly-owned subsidiary of the Company) and Yunnan Chaoyue Gas Company Limited*（雲南超越燃氣有限公司）(''Yunnan Chaoyue Gas'') entered into the cooperation contract dated 13 October 2010, pursuant to which Guangzhou Hyde shall paid a refundable deposit of HK$10 million (''Deposit'') to Yunnan Chaoyue Gas for the purpose of obtaining the operation and management right of the Yunnan Dian Lake project (''Project''). Pursuant to the cooperation contract, Yunnan Chaoyue Gas shall refund the Deposit to Guangzhou Hyde within nine months once it was unsuccessfully to obtain the Project. Yunnan Chaoyue Gas has failed to repay the aforesaid Deposit to Guangzhou Hyde when it fell due. On 1 September 2014, Kunming Court has approved the civil enforcement against Yunnan Chaoyue Gas. On 14 September 2017, Guangzhou Hyde applied to Kunming Court for the resumption of civil enforcement which adjudged in 2014. On 13 August 2019, Yunnan Chaoyue Gas and Guarantors failed to fulfil the settlement agreement, Kunming Court accepted the application relating to the resumption of civil enforcement which submitted by Guangzhou Hyde. The legal proceeding is still in progress.

Save as disclosed above, as at the Latest Practicable Date, neither the Company nor any of its subsidiaries was involved in any litigation or arbitration of material importance and no litigation or claim of material importance was known to the Directors to be pending or threatened against the Company or any of its subsidiaries.

- 41 -

APPENDIX III

GENERAL INFORMATION

9. MISCELLANEOUS

The company secretary of the Company is Ms. Chu Yin Yin, Georgiana, who is a fellow member of the Hong Kong Institute of Certified Public Accountants, the Association of the Chartered Certified Accountants and the Institute of Chartered Accountants in England and Wales.
The registered office of the Company is situated at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands.
The head office and principal place of business of the Company in Hong Kong is located at Room 1207, 12th Floor, West Tower, Shun Tak Centre, 168-200 Connaught Road Central, Sheung Wan, Hong Kong.
The branch share registrar of the Company in Hong Kong is Union Registrars Limited at Suites 3301-04, 33/F, Two Chinachem Exchange Square, 338 King's Road, North Point Hong Kong.
The English text of this circular shall prevail over the Chinese text in the case of any inconsistency.

- 42 -

APPENDIX III

GENERAL INFORMATION

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours at the office of the Company at Room 1207, 12th Floor, West Tower, Shun Tak Centre, 168-200 Connaught Road Central, Sheung Wan, Hong Kong for a period of 14 days from the date of this circular:-

the Disposal Agreement;
the letter from the Board, the text of which is set out in the section headed ''Letter from the Board'' of this circular;
the annual report of the Company for the three financial years ended 31 December 2017, 2018 and 2019;
the property valuation report from AVISTA Valuation Advisory Limited, the text of which is set out in Appendix II of this circular;
the letter of consent from the expert referred to under the section headed ''Expert and consent'' in this appendix;
the memorandum and articles of association of the Company:
the material contracts referred to in the section headed ''Material Contracts'' in this Appendix; and
this circular.

- 43 -

NOTICE OF EXTRAORDINARY GENERAL MEETING

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 1129)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that the extraordinary general meeting (the ''EGM'') of China Water Industry Group Limited (the ''Company'') will be held at Room 13, 7/F., Nexxus Building, 77 Des Voeux Road Central, Central, Hong Kong on Friday, 14 August 2020 at 9:30 a.m. to consider and, if thought fit, pass the following resolution as ordinary resolution (with or without modification):

ORDINARY RESOLUTION

''THAT:

1. (a) the conditional sale and purchase agreement dated 10 June 2020 (the ''Disposal Agreement'') entered into among 鴻鵠（惠州）投資有限公司 (Swan (Huizhou) Investment Company Limited) (the ''Vendor''), an indirect wholly-owned subsidiary of the Company as vendor, 惠州市遠東康壽園療養中心有限公司 (Huizhou Yuandong Kangshouyuan Medical Center Co., Ltd.# ) (the ''Purchaser'') as purchaser and 惠州鴻鵠恒昌置業有限公司 (Huizhou Swan Heng Chang Property Development Company Limited*) (the ''Disposed Company'') in relation to, among others, the sale and purchase of the entire registered capital of the Disposed Company and the transactions contemplated thereunder, be and are hereby approved, confirmed and ratified; and

any one or more director(s) of the Company (the ''Director(s)'') be and are hereby authorised to sign, execute, perfect, deliver and do all such documents, deeds, acts, matters and things, as the case may be, as they may in their discretion consider necessary desirable or expedient to carry out and implement the Disposal Agreement and the transactions contemplated thereunder into full effect and to agree to such variation, amendment or waiver as are in the reasonable opinion of the Directors in the interests of the Company and its shareholders as a whole provided that such variation, amendment or waiver shall not be fundamentally different from the terms as provided in the Disposal Agreement.''

By order of the Board

China Water Industry Group Limited

Mr. Lin Yue Hui

Chairman and Chief Executive Officer

Hong Kong, 24 July 2020

For identification purpose only

EGM - 1

NOTICE OF EXTRAORDINARY GENERAL MEETING

Registered office:	Head office and principal place of
Cricket Square	business in Hong Kong:
Hutchins Drive	Room 1207, 12th Floor
P.O. Box 2681	West Tower, Shun Tak Centre
Grand Cayman KY1-1111	168-200 Connaught Road Central
Cayman Islands	Sheung Wan
	Hong Kong

Notes:

Any member entitled to attend and vote at the EGM is entitled to appoint a proxy to attend and, on a poll, vote in his stead. A member holding two or more Shares may appoint more than one proxy. A proxy need not be a member of the Company.
In order to be valid, a form of proxy together with the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy thereof, must be deposited at the offices of the Company's Hong Kong branch share registrar and transfer office, Union Registrars Limited at Suites 3301-04, 33/F, Two Chinachem Exchange Square, 338 King's Road, North Point, Hong Kong at least 48 hours before the time for holding the above meeting.
In the case of joint holders of a share (a ''Share'') of the Company, any one of such persons may vote at the meeting either in person or by proxy, in respect of such Share as if he/she were solely entitled thereto, but if more than one of such joint holders be present at any meeting the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding.
In order to qualify for entitlement to attend the EGM, all completed transfer forms, accompanied by the relevant share certificates, have to be lodged with the Company's branch share registrar in Hong Kong, Union Registrars Limited at Suites 3301-04, 33/F, Two Chinachem Exchange Square, 338 King's Road, North Point, Hong Kong for registration, not later than 4:00 p.m. on Monday, 10 August 2020.
Delivery of an instrument appointing a proxy shall not preclude a shareholder from attending and voting in person at the EGM and in such event, the instrument appointing a proxy shall be deemed to be revoked.
If Typhoon Signal No. 8 or above, or a ''black'' rainstorm warning is in effect any time after 6:30 a.m. on the date of the EGM, the meeting will be postponed. The Company will publish an announcement on the website of the Company at www.chinawaterind.com and on the website of the Stock Exchange at www.hkexnews.hk to notify Shareholders of the date, time and venue of the rescheduled meeting.
As at the date of this notice, the Board comprises Mr. Lin Yue Hui, Mr. Zhong Wei Guang, Mr. Liu Feng, Ms. Chu Yin Yin, Georgiana, Ms. Deng Xiao Ting, Mr. Ho Chi Ho and Mr. Zhu Yongjun, all being executive Directors, and Mr. Wong Siu Keung, Joe, Mr. Guo Chao Tian, Ms. Qiu Na and Mr. Lam Cheung Shing, Richard, all being independent non-executive Directors.

EGM - 2

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China Water Industry Group Limited published this content on 23 July 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 July 2020 09:40:10 UTC

Market Closed - Hong Kong S.E. Other stock markets 04:08:06 2024-04-30 am EDT			5-day change	1st Jan Change
0.131 ^HKD	-1.50%		-5.76%	-2.24%

Apr. 29	China Water Industry Shareholders to Vote May 14 on Proposed Disposal	MT
Mar. 27	China Water Industry Group Limited Reports Earnings Results for the Full Year Ended December 31, 2023	CI

China Water Industry Shareholders to Vote May 14 on Proposed Disposal	Apr. 29	MT
China Water Industry Group Limited Reports Earnings Results for the Full Year Ended December 31, 2023	Mar. 27	CI
China Water Industry to Widen Loss in 2023	Mar. 21	MT
China Water Industry Group Limited Provides Earnings Guidance for the Year Ended 31 December 2023	Mar. 20	CI
China Water Industry Bags HK$87 Million Food Waste Recycling Contract from Hong Kong Government	Feb. 01	MT
China Water Industry to Generate Power from Zhangwu Landfill	Nov. 28	MT
China Water Industry Unit Hires Contractor for Building Construction	23-09-29	MT
China Water Industry Unit Hires Upgrading, Modification Services for Sewage Treatment Plant	23-09-13	MT
China Water Industry Group Limited Reports Earnings Results for the Half Year Ended June 30, 2023	23-08-30	CI
China Water Industry Group Limited Provides Unaudited Consolidated Earnings Guidance for the Six Months Ended 30 June 2023	23-08-11	CI
China Water Units Ink Finance Lease Agreements with Haitong Unitrust	23-08-03	MT
China Water Industry Unit Purchases Biogas Generator Sets for 69 Million Yuan	23-07-20	MT
China Water Industry Unit to Buy 5 Biogas Generators	23-07-19	MT
China Water Industry Bags Two Recycling Contracts	23-06-26	MT
China Water Industry Unit Bags HK$319 Million Recyclable Glass Collection, Processing Projects	23-06-23	MT
China Water Industry Group Limited Announces Retirement of Deng as Executive Director	23-06-16	CI
Jiangsu Leasing Purchases Power Generation Equipment For Leaseback	23-06-08	MT
China Water Industry Mulls Sale of Stake in Five Subsidiaries	23-05-31	MT
China Water Industry Group Limited Reports Earnings Results for the Full Year Ended December 31, 2022	23-03-30	CI
China Water Industry Group Limited Provides Unaudited Consolidated Financial Guidance of the Group for the Year Ended 31 December 2022	23-03-20	CI
China Water Industry Group Unit to Inject 18 Million Yuan into Boli County Zhongshui	23-01-06	MT
China Water Industry Group Sells Power Generating Facilities for Leaseback	22-10-18	MT
China Water Industry Unit to Offload 60% Stake in Chinese Water Supplier for $7 Million	22-10-11	MT
China Water Industry Swings to Loss in H1	22-09-28	MT
China Water Industry Group Limited Announces Change of Address of Principal Place of Business in Hong Kong, Effective October 1, 2022	22-09-27	CI

	1st Jan change	Capi.
CHINA WATER INDUSTRY GROUP LIMITED	-2.24%	48.13M
NEXTERA ENERGY	+11.88%	138B
SOUTHERN COMPANY	+6.12%	80.38B
IBERDROLA, S.A.	-3.03%	77.44B
DUKE ENERGY CORPORATION	+3.01%	75.8B
ENEL S.P.A.	-8.16%	67.13B
CONSTELLATION ENERGY CORPORATION	+59.15%	58.59B
AMERICAN ELECTRIC POWER COMPANY, INC.	+8.64%	45.3B
DOMINION ENERGY, INC.	+9.41%	42.7B
GE VERNOVA INC.	0.00%	41.82B

China Water Industry Group Limited

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KYG2114E1355

Electric Utilities

China Water Industry : MAJOR TRANSACTION IN RELATION TO THE DISPOSAL OF THE ENTIRE EQUITY INTERESTS IN HUIZHOU SWAN HENG CHANG PROPERTY DEVELOPMENT COMPANY LIMITED* AND NOTICE OF EXTRAORDINARY GENERAL MEETING

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