Guangdong Investment : Discloseable Transaction – Participation in Public-Private-Partnership Project

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(Incorporated in Hong Kong with limited liability)

(Stock Code: 0270) DISCLOSEABLE TRANSACTION PARTICIPATION IN PUBLIC-PRIVATE-PARTNERSHIP PROJECT Financial Adviser to Guangdong Investment Limited THE PROJECT

The Board is pleased to announce that on 8 June 2016, the Company entered into the Cooperation Agreement with the Xiegang Government in respect of the cooperation between the Xiegang Government and the Group in a Public-Private-Partnership Project for the development of certain public roads (which are not toll roads) in 銀瓶創新區 (Yinping

Innovation Zone) in Dongguan, Guangdong, the PRC, in which the Company was a successful bidder as the private sector participant.

The Project comprises the construction of the Project Roads and the related ancillary support services such as drainage, greening and lighting. The Project's total Development Costs shall not exceed RMB 4.754 billion (equivalent to approximately HK$5.614 billion).

LISTING RULES IMPLICATIONS

For the purposes of the Listing Rules, the Group's participation in the Project constitutes financial assistance by the Group to the Xiegang Government. Since all the applicable percentage ratios in respect of such financial assistance exceed 5% but are less than 25% as determined in accordance with Rule 14.07 of the Listing Rules, the Project constitutes a discloseable transaction of the Company for the purpose of Chapter 14 of the Listing Rules.

1. THE PROJECT
2. Introduction

   Reference is made to the announcement of the Company dated 29 April 2016, which disclosed that the Xiegang Government, through its bidding agency, published an announcement which stated that the Company was the successful bidder (成交供應商) in a Public-Private-Partnership project (the "Project") for the development of certain

   public roads (which are not toll roads) in 銀瓶創新區 (Yinping Innovation Zone) in

   Dongguan, Guangdong, the PRC.

   The Board is pleased to announce that on 8 June 2016, the Company entered into the Cooperation Agreement with the Xiegang Government in respect of the cooperation between the Xiegang Government and the Group in the Project.

   The Public-Private-Partnership (commonly known as "PPP") model is an emerging cooperation model, supported by national policies, for the public and private sectors to work together under the leadership of the relevant PRC local government. While it typically involves the use of private sector capital in public sector works, there is no fixed cooperation model, as the extent and nature of the private sector's involvements are driven by the requirements of the local government concerned.

3. The Project

   The Project comprises the construction of certain A-grade highways, connecting roads and municipal roads in 銀瓶創新區 (Yinping Innovation Zone) (each a "Project Road" and together, the "Project Roads") and the related ancillary support services

   such as drainage, greening and lighting. It is expected upon the completion of the Project, that the Project Roads will form a highway and municipal road network in Yinping Innovation Zone. Based on the information from the Xiegang Government, the Project Roads are public (non toll road) facilities.

4. The PPP Agreements

   The Group's participation in the Project will be governed by the terms of the PPP Agreements, comprising the abovementioned Cooperation Agreement (being a framework agreement providing for the terms of cooperation between the Xiegang Government and the Group in the Project), which was entered into between the Xiegang Government and the Company on 8 June 2016, and the Project Maintenance Agreements with respect to the specific development and maintenance of the Project Roads within the scope contemplated by the Cooperation Agreement.

   The Company is in the process of establishing the Project Co and the Dongguan Government (東莞市人民政府) will set up 銀瓶創新區管委會 (Yinping Innovation

   Zone Administrative Committee) (the "Yinping Committee") as the implementation agency (實施機構) of the Project. The rights and responsibilites of the Xiegang Government and the Company under the Cooperation Agreement will be transferred

   to the Yinping Committee and Project Co, respectively, after their establishment. Project Co and the Xiegang Government or the Yinping Committee (as the case may

   be) will also enter into the Project Maintenance Agreements with respect to the relevant Project Roads prior to the commencement of work for such Project Roads.

   The salient features of the PPP Agreements are summarised as follows:

   Responsibilities of the parties

   The Xiegang Government shall be responsible for, inter alia, carrying out pre- development works of the Project such as works relating to demolition and relocation of residents and coordinating with relevant governmental authorities for obtaining relevant approvals necessary for the Project.

   The Group shall be responsible for, inter alia, providing funding for the development of the Project Roads (the "Development Costs"), introduction of contractors for the development works, coordinating with various parties and the maintenance of the Project Roads for normal wear and tear (i.e. excluding upgrades and major repair works). The Group will not be responisble for carrying out the actual construction or development work, which will be undertaken by professional contractors.

   Project Term

   The term of the Project with respect to each Project Road (the "Project Term") shall comprise (i) the development period (the "Development Period"), being the period of construction of the Project Road; and (ii) the maintenance period, being ten years (the "Maintenance Period") from the acceptance of the Project Road by the Xiegang Government. Throughout the Project Term, the Xiegang Government shall remain the owner of the Project Roads.

   Depending on the overall development plan and progress of 銀瓶創新區 (Yinping Innovation Zone), it is expected that the Project Roads will be constructed in different phases.

   Development Costs, Return, etc.

   The Project's total Development Costs shall not exceed RMB 4.754 billion (equivalent to approximately HK$5.614 billion). During the Development Period, each Project Road will be budgeted for and developed separately and subject to the approval of the Xiegang Government. If it is anticpated that the development of a particular Project Road would make the total Development Costs exceed RMB 4.754 billion (equivalent to approximately HK$5.614 billion), the Group shall have the right not to proceed with the development of that Project Road.

   The abovementioned total Development Costs were arrived at after arm's length negotiations between the Company and the Xiegang Government taking into account, among others, the structure of the public roads, average labour and material costs, and inflation in the PRC.

   With regard to each Project Road, the Xiegang Government shall pay the following amounts to Project Co:

5. the repayment of the Development Costs by 10 annual instalments throughout the Maintenance Period;

6. a return (the "Return") calculated at the rate of:

7. 8% (compounded annually) of each amount disbursed by Project Co (such amounts together constitute the Development Costs for such Project Road) accrued from the date of disbursement of each such amount becoming payable until the end of the Development Period of the relevant Project Road. This amount (the "Accrued Interest Amount") will be paid by 10 annual instalments throughout the Maintenance Period of that Project Road; and

8. 8% per annum (on a reducing balance basis, because, as indicated in paragraphs (1) and (2)(i) above and paragraph (3) below, the Development Costs, the Accrued Interest Amount and the Management Fee will be repaid by 10 instalments) of the aggregate of the then outstanding Development Costs, Accrued Interest Amount and the Management Fee (as defined below) over the Maintenace Period;

9. a management fee (the "Management Fee") equal to 2.5% of the Development Costs to be paid by 10 annual instalments throughout the Maintenance Period; and

10. an annual maintenance fee (the "Maintenance Fee") equal to 1.1% of the total Development Costs, which will be paid annually over the Maintenance Period.

    The Return, Management Fee and Maintenance Fee were arrived at after arm's length negotiations between the Company and the Xiegang Government taking into account, among others, fee structure in other similar transactions and estimated costs.

11. Reasons for and benefits of the Group's participation in the Project

As part of the Group's business strategy, the Group will continue to explore business opportunities in the area of water resource management, property and infrastructure development. The Group has closely monitored investment opportunities involving PPP projects with the goal of continuing its business expansion to promote growth and to further enhance the Company's financial performance, while ensuring the stability of its core businesses. The Board believes that the Group's participation in the Project is a good investment opportunity for the following reasons:

• Alignment with national policies to promote PPP

In recent years, the Ministry of Finance, the Department of Finance of Guangdong Province and the Development and Reform Commission of Guangdong Province have issued guidelines to promote the PPP model. Through these national policies, the PRC Government aims to expand the financing channels, speed up construction and improve the overall financing and management process for public sector works.